Home Appraisals: A Primer

Getting a house can be the largest investment most people will ever make. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.

Most of the people participating are very familiar. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the money necessary to finance the exchange. And ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller 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 is responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Ed Cline Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Ed Cline Appraisals is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for 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 real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser uses information on local construction costs, labor rates and other elements to determine how much it would cost to build a property comparable 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 method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, 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 Ed Cline Appraisals, we are experts when it comes to knowing the value of particular items in Beaver Falls and Beaver County neighborhoods. 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

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the real estate generates is factored in with income produced by nearby properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. 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.But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Ed Cline Appraisals will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.