A Description of the Appraisal Process

Their home's purchase is the most significant transaction many of us may ever encounter. Whether it's a main residence, a second vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

Practically all the participants are very familiar. The real estate agent is the most familiar entity in the transaction. Then, the bank provides the money needed to finance the exchange. And ensuring all areas of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

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So, what party makes sure the value of the property is consistent with the amount being paid? In comes 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 E & B Certified Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

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.

Replacement Cost

Here, the appraiser gathers information on local building costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property being appraised. 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 more accurately portray the features of subject.

  • For example, if the comparable property 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 a certain amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At E & B Certified Appraisals, we are experts when it comes to knowing the value of particular items in Worth and Cook County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the real estate generates is factored in with income produced by nearby properties to derive the current value.

The Bottom Line

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 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 valueDepending 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 can always be driven up or down.But the appraised value is typically used 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. The bottom line is, an appraiser from E & B Certified Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.