What Is an Appraisal?

Their home's purchase is the most serious investment many may ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.

Practically all the people participating are very familiar. The most known person in the transaction is the real estate agent. Next, the lender provides the money necessary to finance the transaction. And ensuring all aspects of the exchange are completed and that the title is clear to pass 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, who makes sure the real estate is worth the amount being paid? 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 Tom C. Rice will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Tom C. Rice is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies 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 analyze information on local construction costs, labor rates and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers get to know the communities in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. 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 more accurately match the features of subject.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • 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.

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. When it comes to valuing features of homes in Sparks and Washoe, Tom C. Rice is your local authority. This approach to value is usually given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that 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 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. Here's what it all boils down to, an appraiser from Tom C. Rice will help you attain the most accurate property value, so you can make wise real estate decisions.