Home Appraisals: A Primer

Purchasing real estate can be the most significant transaction a person might ever consider. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to see it through.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent for the buyer/seller. The mortgage company provides the money needed to fund the exchange. The appraiser assists with the value determination for the mortgage company. The title company sees to it that all aspects of the exchange are completed and that a clear title transfers 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, what party makes sure the property is worth 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 certified professional appraiser from KL Appraisal Services, Inc. will ensure, you as an interested party, are informed.

Appraisal inspections

In most cases, an appraisal inspection is completed to determine the property condition and characteristics. An appraisal inspection is different from a home inspection. We recommend you also get a home inspection when making a purchase.

The appraisal inspection may include measuring, sketching the floorplan and photos.  During the inspection, the appraiser identifies features, both beneficial and adverse, that impact the value of the property.

Back at the office, an appraiser uses the data collected to make a determination of value. The appraisal will use up to three approaches to determining the value of the real estate.

Sales Comparison Approach

Appraisers are very familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. We research recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, quality of the finishes, remodeled rooms, energy efficient items, and garage size, we adjust the comparable properties so that they more accurately match the features of subject property. 
 

  • For example, if the comparable property has a three-car garage and the subject has a two-car garage, the appraiser may subtract the value of the additional garage bay from the sales price of the comparable.

  • In the case where the subject has a superior feature to the comparable, such as a remodeled kitchen, the appraiser might add the value of the upgrade to the comparable property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comparables and then derives an opinion of value. When it comes to knowing the value of home features in the Las Vegas area and Clark, KL Appraisal Services, Inc. is your local authority. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home exchange.

Cost Approach

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to determine how much it would cost to build a property similar to the one being appraised. This estimate often sets the upper limit on value.

 

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use the income approach to value. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by nearby properties to derive the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The final determination of value in the appraisal is the appraiser's opinion of value for the subject property. Depending 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 may be different from the appraised value. 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. The bottom line is, an appraiser from KL Appraisal Services, Inc. will help you attain the most accurate property value, so you can make profitable real estate decisions.