What Is an Appraisal?

A home purchase is the biggest financial decision many could ever consider. Whether it's a primary residence, an additional vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the transaction. Then, the mortgage company provides the money necessary to fund the transaction. And the title company sees to it that all requirements of the sale are completed and that a clear title passes to the buyer from the seller.

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So, what party is responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Advantage Appraisal Inc. (207) 794-2018 will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and document the layout of the home, 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 house.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we pull information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Advantage Appraisal Inc. (207) 794-2018, we are an authority in knowing the value of particular items in Lincoln and Penobscot County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.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 recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from Advantage Appraisal Inc. (207) 794-2018 will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.