What Are the Parts of an Appraisal?

A home purchase is the most significant financial decision some people will ever consider. Whether it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Then, the mortgage company provides the financial capital needed to finance the transaction. And the title company makes sure that all areas of the sale are completed and that a clear title transfers from the seller to the buyer.

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So, who makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. 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 Progessive Appraisal of Oregon Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Progessive Appraisal of Oregon Inc. is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we gather information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as square footage, extra 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.

  • If, for example, 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.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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 putting a value on features of homes in Portland and Multnomah, Progessive Appraisal of Oregon Inc. is second to none. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate generates is factored in with income produced by similar properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. Depending 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.Regardless, the appraised value is typically 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. Here's what it all boils down to, an appraiser from Progessive Appraisal of Oregon Inc. will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.