What goes into an appraisal?

A home purchase can be the most important transaction some people may ever encounter. It doesn't matter if it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.


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You're likely to be familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Next, the lender provides the money required to fund the deal. The title company sees to it that all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller.

So who's responsible for making sure the value of the property 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 professional Michigan licensed appraiser from Appraisal Now will ensure you as an interested party are informed.

Appraisals begin with the home inspection

Our first duty at Appraisal Now is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for 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 real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser pulls information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

Say, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Appraisal Now, we are experts in knowing the value of real estate features in Davisburg and Oakland County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of 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 value It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this: An appraiser from Appraisal Now will help you discover the most accurate property value, so you can make the most informed real estate decisions.