Understanding the Appraisal Process

Acquiring a home is the most serious financial decision most of us will ever encounter. Whether it's a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties 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 known face in the exchange. Then, the bank provides the money needed to fund the transaction. And the title company makes sure that all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller.

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 purchase price? In comes the appraiser. We provide an unbiased opinion 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 Wasatch Back Appraisal will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first task at Wasatch Back Appraisal is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

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

Replacement Cost

This is where the appraiser gathers information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of specific features to the people 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, additional 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.

  • If, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • However, 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 Wasatch Back Appraisal, we are an authority when it comes to knowing the value of particular items in Midway and Wasatch County neighborhoods. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by similar properties to determine the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending 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.Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Wasatch Back Appraisal will help you attain the most fair and balanced property value, so you can make wise real estate decisions.