An Overview of the Appraisal Process

Purchasing a house can be the biggest investment some people will ever make. Whether it's a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Most of the participants are very familiar. The most known entity in the transaction is the real estate agent. Next, the bank provides the financial capital required to bankroll the deal. And the title company ensures that all areas of the exchange are completed and that a clear title transfers from the seller to the purchaser.

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 value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Kaysen Realty Valuation will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the communities in which they work. 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. By assigning a dollar value to 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 are more accurately in line with the features of subject property.

  • If, for example, the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter 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.

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. When it comes to putting a value on features of homes in Grafton and Ozaukee, Kaysen Realty Valuation can't be beat. This approach to value is most often given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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. It all comes down to this, an appraiser from Kaysen Realty Valuation will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.