Decoding the Appraisal Process

A home purchase is the most important financial decision most might ever consider. It doesn't matter if it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.


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

Most of the people involved are quite familiar. The real estate agent is the most recognizable face in the transaction. Then, the bank provides the money needed to fund the deal. The title company makes sure that all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

So who's responsible for making sure the property is consistent with the amount being paid? 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 professional Kentucky licensed appraiser from McPherson Appraisal Service, Inc will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are present and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we analyze information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure usually 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 neighborhoods in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of 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 property.

For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

At McPherson Appraisal Service, Inc, we are an authority when it comes to knowing the value of particular items in Scottsville and Allen County neighborhoods. The sales comparison approach to value is commonly given the most consideration 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 - we may use an additional method of valuing real estate. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value 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 the property would likely sell for in an open marketplace. At the end of the day: An appraiser from McPherson Appraisal Service, Inc will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.