How the Appraisal Process Works
A real estate appraisal starts with a home visit, where the appraiser inspects the property to ascertain its true status.
They verify features like the number of bedrooms and bathrooms and assess their condition.
The visit often includes a sketch and photos to ensure accurate square footage and to convey the property's layout and condition.
The appraiser looks for features or defects that could affect the property's value.
After the visit, the appraiser uses two or three approaches to determine the property's value:
Sales Comparison Approach
The appraiser researches recent sales in the vicinity and finds properties comparable to the one being appraised.
They adjust these comparable properties for specific features like extra bathrooms or kitchen remodels to accurately portray the subject property.
Cost Approach
The appraiser uses local building costs and labor rates to estimate how much it would cost to construct a similar property. This value sets the upper limit on what the property would sell for.
Income Approach
For income-producing properties, the appraiser uses the amount of income the property generates to determine its current value.
Final Reconciliation
The appraiser combines information from all approaches to estimate the property's market value. While this amount is usually the best indication of the property's worth, the final sales price may vary due to factors like seller motivation or bidding wars.
The appraised value serves as a guideline for lenders to avoid loaning more money than the property’s likely market value.
The bottom line is: an appraiser helps you get the most accurate property value, enabling you to make informed real estate decisions.
An estate administrator who needs to determine the value of a property for probate or estate tax purposes
An individual who is considering purchasing or selling a property, but wants to have an independent assessment of its value before making an offer or selling
A property owner who is in a dispute with the local tax assessor over the assessed value of their property, and wants to have an independent appraisal to support their case
A divorce attorney who needs an independent assessment of a property's value in order to divide assets fairly