Comprehending Appraisals

Getting a home can be the biggest financial decision some may ever make. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

The majority of the participants are quite familiar. The most recognizable person in the transaction is the real estate agent. Next, the mortgage company provides the financial capital required to fund the exchange. And ensuring all requirements of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Medina Appraisal Company will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Medina Appraisal Company is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we gather information on local building costs, the cost of labor and other elements to calculate how much it would cost to build a property similar to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Brunswick, OH and Medina, Medina Appraisal Company is your local authority. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate generates is factored in with income produced by similar properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from Medina Appraisal Company will help you discover the most accurate property value, so you can make profitable real estate decisions.