Understanding the Appraisal Process

A home purchase can be the most important investment some may ever encounter. Whether it's a main residence, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

The majority of the parties involved are very familiar. The most recognizable entity in the transaction is the real estate agent. Next, the bank provides the financial capital needed to fund the deal. The title company makes sure that all details of the exchange are completed and that a clear title transfers 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, what party 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Schwarz Appraisal Co. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Schwarz Appraisal Co. is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present 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 proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - 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: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we use information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.

  • If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an 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. When it comes to putting a value on features of homes in Omaha and Douglas, Schwarz Appraisal Co. is second to none. This approach to value is usually given the most weight 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 case, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. 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.Regardless, the appraised value is often employed 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 Schwarz Appraisal Co. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.