Comprehending Appraisals

Acquiring a home can be the most significant investment some will ever encounter. It doesn't matter if a primary residence, a second vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Then, the bank provides the financial capital required to finance the deal. And the title company makes sure that all areas of the sale are completed and that a clear title passes to the buyer from the seller.

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 amount being paid? This is where the appraiser comes in. 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 Timeline Appraisal Services, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

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

This is where we use information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of particular 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 property being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price 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 subtract the value of a storm shelter from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath 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 Timeline Appraisal Services, LLC, we are an authority in knowing the value of particular items in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the property produces is taken into consideration along with income produced by similar 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 document an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this, an appraiser from Timeline Appraisal Services, LLC will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.