Home Appraisals: A Primer

A home purchase is the most important investment some of us will ever encounter. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Then, the lender provides the financial capital required to fund the deal. And the title company sees to it that all areas of the transaction are completed and that the title is clear to pass 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, who's responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 North Idaho Residential Appraiser will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, we use 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.

Replacement Cost

Here, the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions 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 fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • 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.

A valid 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 valuing features of homes in SAGLE and Bonner, North Idaho Residential Appraiser can't be beat. This approach to value is commonly given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes used when an area has a measurable number of rental properties. In this situation, the amount of revenue the property generates is taken into consideration along with income produced by neighboring properties to determine 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 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 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from North Idaho Residential Appraiser will help you attain the most fair and balanced property value, so you can make wise real estate decisions.