Understanding Appraisals

Acquiring real estate can be the biggest investment most of us may ever make. Whether it's where you raise your family, an additional vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

The majority of the participants are quite familiar. The real estate agent is the most recognizable face in the transaction. Then, the bank provides the money necessary to fund the exchange. And ensuring all aspects of the exchange are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, who makes sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 CCM Appraisal Systems, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, 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.

Replacement Cost

This is where we pull 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 often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. 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 are more accurately in line with the features of subject.

  • If, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • 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 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 can't be beat. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the property yields is taken into consideration along with income produced by similar properties to determine the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing 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. At the end of the day, an appraiser from CCM Appraisal Systems, LLC will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.