Understanding the Appraisal Process

Their home's purchase is the most serious investment many will ever make. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties taking part in the transaction. The most known face in the transaction is the real estate agent. Next, the mortgage company provides the money required to bankroll the transaction. And the title company makes sure that all aspects of the exchange are completed and that a clear title passes 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's responsible for making sure the value of the real estate is consistent 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from MCB Appraisals LLC will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we gather information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the communities in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject 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 additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.

  • Say, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • However, 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At MCB Appraisals LLC, we are experts when it comes to knowing the value of real estate features in Auburn and Lee County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with income produced by comparable properties to derive the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often 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 put the property on the market again. The bottom line is, an appraiser from MCB Appraisals LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.