What Is an Appraisal?

A home purchase is the most serious financial decision some of us will ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the exchange. Next, the lender provides the financial capital necessary to bankroll the exchange. And the title company sees to it that all details of the transaction are completed and that the title is clear to pass 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 value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 Scott Malen Appraisal Services will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we gather information on local building costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, additional 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 more accurately portray the features of subject.

  • Say, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace 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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Scott Malen Appraisal Services, we are experts when it comes to knowing the worth of particular items in Stamford and Fairfield County neighborhoods. The sales comparison approach to value is commonly 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 approach to value. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the individual 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Scott Malen Appraisal Services will help you attain the most accurate property value, so you can make the most informed real estate decisions.