Understanding the Appraisal Process

Getting real estate can be the largest transaction many people will ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to fund the transaction. And ensuring all details of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making 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 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 ValuTrust Solutions, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at ValuTrust Solutions, Inc. is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, 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, we gather information on local construction costs, labor rates and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • Say, for example, 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 home.
  • 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. At ValuTrust Solutions, Inc., we are an authority in knowing the worth of real estate features in Overland Park and Johnson County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the specific 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from ValuTrust Solutions, Inc. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.