Home Appraisals: A Primer

A home purchase can be the most serious financial decision many could ever encounter. Whether it's a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to see it through.

The majority of the people participating are quite familiar. The most recognizable entity in the transaction is the real estate agent. Then, the mortgage company provides the money needed to bankroll the exchange. The title company sees to it that all details of the exchange are completed and that a clear title passes 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 makes sure the property is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Bowen Agency Realtors will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at Bowen Agency Realtors is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and document the layout of the house, the inspection often entails 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 house.

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

Replacement Cost

This is where we pull information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This value often 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 innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions 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 upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • But, 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. At Bowen Agency Realtors, we are experts in knowing the worth of particular items in Selinsgrove and Snyder County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the best 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 the property is actually worth. The bottom line is, an appraiser from Bowen Agency Realtors will help you attain the most accurate property value, so you can make profitable real estate decisions.