A Description of the Appraisal Process

Getting a house is the biggest investment many of us could ever encounter. It doesn't matter if a main residence, a seasonal vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

Practically all the participants are very familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital required to fund the transaction. The title company makes sure that all aspects of the exchange are completed and that the title is clear to pass 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 property is in line with the purchase price? This is where you meet the appraiser. 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 Gillman Appraisal LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Gillman Appraisal LLC is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating 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.

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.

Cost Approach

Here, the appraiser gathers information on local building costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match 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.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, 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 valuing features of homes in Bay City and Bay, Gillman Appraisal LLC can't be beat. This approach to value is commonly given the most importance 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 method of valuing a property. In this scenario, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. 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 what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 case they had to sell the property again. At the end of the day, an appraiser from Gillman Appraisal LLC will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.