Comprehending Appraisals

Buying a house is the largest investment some people will ever encounter. It doesn't matter if where you raise your family, a second vacation home or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.

Most of the participants are very familiar. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the financial capital needed to finance the deal. And the title company sees to it that all details of the sale are completed and that a clear title transfers from the seller to the buyer.

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 real estate is worth the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Deer Creek Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at Deer Creek Appraisals is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape 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.

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

Cost Approach

Here, the appraiser pulls information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject.

Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath 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. At Deer Creek Appraisals, we are experts when it comes to knowing the worth of real estate features in Denver and Jefferson County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this scenario, the amount of revenue the property produces is factored in with income produced by similar properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. Depending on the specific circumstances 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 often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Deer Creek Appraisals will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.

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