Home Appraisals: A Primer

Their home's purchase is the most significant transaction some could ever encounter. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Practically all the parties participating are very familiar. The real estate agent is the most recognizable person in the exchange. Then, the bank provides the financial capital required to fund the deal. And ensuring all areas of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.

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 is responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet 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 Hensleigh Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Hensleigh Appraisal Services is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical person would expect them to be. To ensure the stated square footage is accurate and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, 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 Hensleigh Appraisal Services, we are experts when it comes to knowing the value of particular items in Lake Oswego and Clackamas County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price 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 typically 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 Hensleigh Appraisal Services will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.