Making Sense of the Appraisal Process

Their home's purchase is the most significant financial decision some people could ever make. Whether it's a main residence, an additional vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

Most of the people participating are quite familiar. The real estate agent is the most recognizable face in the transaction. Next, the lender provides the financial capital required to fund the exchange. And the title company makes sure that all aspects of the sale are completed and that the title is clear to transfer 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 value of the real estate is consistent with 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 Anchor Appraisals, LLC. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Anchor Appraisals, LLC. is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property in question. By assigning a dollar value to 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 property.

  • If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath 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. When it comes to knowing the true worth of features of homes in Albuquerque and Bernalillo, Anchor Appraisals, LLC. is your local authority. This approach to value is usually awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. There 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 typically 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 sell the property again. The bottom line is, an appraiser from Anchor Appraisals, LLC. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.