Decoding the Appraisal Process

Purchasing a house can be the biggest transaction some may ever encounter. It doesn't matter if a main residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Then, the lender provides the money needed to finance the exchange. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.

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So, who makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from CCM Appraisal Systems, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at CCM Appraisal Systems, LLC is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

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

Cost Approach

Here, the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At CCM Appraisal Systems, LLC, we are an authority in knowing the value of particular items in Mounds View and Ramsey 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

A third way of valuing a house is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of revenue the property generates is factored in with income produced by nearby properties to give an indicator of the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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 CCM Appraisal Systems, LLC will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.