What Is an Appraisal?

A home purchase is the most important investment many people will ever make. It doesn't matter if a primary residence, a second vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.

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. Then, the mortgage company provides the financial capital needed to fund the transaction. And ensuring all aspects of the exchange are completed and that a clear title passes 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, what party is responsible for making sure the value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Saknit & Associates will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at Saknit & Associates is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify 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 the property: a paired sales analysis, 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 elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific 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 home at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, 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 an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true value of features of homes in Boise and Ada, Saknit & Associates can't be beat. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

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

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the individual 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. At the end of the day, an appraiser from Saknit & Associates will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.