Understanding the Appraisal Process

Purchasing a home is the biggest investment most people may ever make. Whether it's where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the money needed to finance the transaction. And ensuring all details of the transaction are completed and that the title is clear to pass from the seller to the purchaser 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 makes sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 George R. Pinkham will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first responsibility at George R. Pinkham is to inspect the property to ascertain 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 are there and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

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

Replacement Cost

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

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Cornwall On Hudson and Orange, George R. Pinkham can't be beat. This approach to value is typically awarded the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final 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 the property is actually worth. Here's what it all boils down to, an appraiser from George R. Pinkham will guarantee you get the most accurate property value, so you can make profitable real estate decisions.