A Description of the Appraisal Process

Buying a home is the largest investment most will ever consider. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.

Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital required to fund the exchange. And ensuring all areas of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.

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 property is in line with the purchase price? This is where the appraiser comes in. 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 Graham Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Graham Appraisals is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, 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.

Cost Approach

This is where the appraiser analyzes information on local building costs, labor rates and other elements to derive how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the homeowners 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. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • 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.

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 associating a value with features of homes in and Missoula, Graham Appraisals is your local authority. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the price at which the property closes. Depending 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 often 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 Graham Appraisals will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.