What Goes Into an Appraisal?

Buying a home is the most important investment most will ever encounter. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.

The majority of the parties participating are very familiar. The real estate agent is the most recognizable entity in the exchange. Next, the lender provides the money necessary to fund the deal. The title company sees to it that all areas of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

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So, what party makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Allstate Appraisers Service will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a reasonable 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 affect the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we pull information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

For example, if 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. When it comes to knowing the true worth of features of homes in Clio and Genesee, Allstate Appraisers Service can't be beat. This approach to value is most often awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of revenue the property yields is factored in with income produced by neighboring properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. The bottom line is, an appraiser from Allstate Appraisers Service will guarantee you get the most accurate property value, so you can make wise real estate decisions.