Comprehending Appraisals

A home purchase can be the most important financial decision some of us might ever consider. Whether it's a primary residence, a second vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.

Most of the people participating are very familiar. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the money required to finance the exchange. The title company makes sure that all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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 is responsible for making sure the property 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 Chilmark Appraisal will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we analyze information on local construction costs, labor rates and other elements to derive how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.

  • If, 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.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Chilmark Appraisal, we are experts in knowing the value of particular items in Idaho Falls and Bonneville County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. Depending on the individual 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from Chilmark Appraisal will help you attain the most accurate property value, so you can make wise real estate decisions.