What Goes Into an Appraisal?

Purchasing real estate can be the biggest investment many people may ever make. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Then, the mortgage company provides the money needed to bankroll the exchange. And ensuring all details of the sale are completed and that the title is clear to pass 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, who makes sure the real estate is worth the purchase price? In comes 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 CCM Appraisal Systems, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

After the inspection, we use 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, we gather information on local construction costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to 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 match the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • However, 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.

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 knowing the true worth of features of homes in Mounds View and Ramsey, CCM Appraisal Systems, LLC is your local authority. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a real estate purchase.

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 scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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. Here's what it all boils down to, an appraiser from CCM Appraisal Systems, LLC will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.