Understanding Appraisals

Purchasing a house is the largest transaction some could ever make. It doesn't matter if a main residence, a second vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties taking part in the transaction. The most familiar person in the transaction is the real estate agent. Next, the bank provides the money necessary to fund the transaction. And ensuring all aspects of the sale are completed and that the title is clear to transfer 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 makes sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Biagi Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Biagi Appraisal Services is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often includes 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.

After the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. 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 adjust the comparable properties so that they more accurately portray the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • However, 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.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Walla Walla and Walla Walla, Biagi Appraisal Services is second to none. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a real estate exchange.

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 house. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by neighboring properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific circumstances 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.But the appraised value is typically employed 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. At the end of the day, an appraiser from Biagi Appraisal Services will guarantee you get the most accurate property value, so you can make profitable real estate decisions.