Decoding the Appraisal Process

Their home's purchase is the most serious investment many could ever encounter. It doesn't matter if where you raise your family, a second vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the financial capital required to fund the exchange. And the title company makes sure that all details of the exchange are completed and that a clear title passes from the seller to the purchaser.

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 property is worth the amount being paid? This is where you meet 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 Ironman Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at Ironman Appraisals is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect 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: sales comparison 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 factors to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Ironman Appraisals, we are an authority when it comes to knowing the value of particular items in Lakewood and Jefferson County neighborhoods. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is, an appraiser from Ironman Appraisals will help you discover the most accurate property value, so you can make wise real estate decisions.