A Description of the Appraisal Process

A home purchase can be the largest investment most people could ever make. Whether it's a main residence, an additional vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

The majority of the parties involved are quite familiar. The real estate agent is the most known entity in the exchange. Next, the bank provides the financial capital required to finance the exchange. And ensuring all details of the transaction are completed and that a clear title passes to the buyer from the seller is the title company.

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So, what party makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Fortuna Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct 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, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, we use information on local construction costs, labor rates and other factors to determine how much it would cost to build a property comparable to the one being appraised. This figure often 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 neighborhoods in which they appraise. They thoroughly understand the value of specific 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 at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.

  • For example, if the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • 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.

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. When it comes to knowing the true worth of features of homes in Williford and Sharp, Fortuna Appraisals is second to none. This approach to value is usually awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to document 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. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. At the end of the day, an appraiser from Fortuna Appraisals will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.