An Overview of the Appraisal Process

Purchasing a house is the most serious financial decision many of us will ever make. It doesn't matter if a primary residence, a second vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.

Practically all the participants are quite familiar. The most recognizable person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to bankroll the exchange. And ensuring all requirements of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.

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So, who's responsible for making 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 duty to first perform a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we pull information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable 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.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an 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 Timeline Appraisal Services, LLC, we are an authority in knowing the worth of particular items in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this scenario, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Examining the data from all 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 a property's valuePrices 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Timeline Appraisal Services, LLC will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.