Comprehending Appraisals

A home purchase can be the biggest investment most of us might ever consider. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known person in the transaction. Next, the mortgage company provides the money required to fund the deal. The title company makes sure that all areas of the sale 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 value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Streamline Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Streamline Appraisals is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present 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 correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

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

Replacement Cost

Here, we use information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject property.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Streamline Appraisals, we are experts in knowing the value of particular items in Missoula and Missoula County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing a house. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the individual 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Streamline Appraisals will help you discover the most accurate property value, so you can make profitable real estate decisions.