Breaking Down the the Appraisal Process

Acquiring a home is the most serious transaction many people might ever consider. Whether it's a primary residence, a second vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.


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Most people are familiar with the parties taking part in the transaction. The most known person in the transaction is the real estate agent. Next, the bank provides the financial capital necessary to bankroll the deal. Ensuring all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

So what party makes sure the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional New Jersey licensed appraiser from Elko Appraisal Services will ensure you as an interested party are informed.

Appraisals begin with the home inspection

Our first duty at Elko Appraisal Services is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, 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 house, ensuring the square footage is accurate 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 house.

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

Cost Approach

Here, we analyze information on local building costs, labor rates and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they work. We thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
But, 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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. This approach to value is usually given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the real estate produces is factored in with income produced by comparable properties to determine the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of 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 market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is typically employed 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. Here's what it all boils down to: An appraiser from Elko Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.