Understanding the Appraisal Process

Getting a home can be the biggest transaction some people could ever encounter. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most people are familiar with the parties taking part in the transaction. The most recognizable face in the transaction is the real estate agent. Then, the bank provides the money needed to fund the deal. And ensuring all areas of the sale are completed and that a clear title passes from the seller to the purchaser 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, who makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might 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 Adams Real Estate Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Adams Real Estate 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 really are there and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate 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.

Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser uses information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion 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 Lexington and Fayette, Adams Real Estate Services can't be beat. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. 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 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 Adams Real Estate Services will guarantee you attain the most accurate property value, so you can make wise real estate decisions.