Understanding the Appraisal Process

Their home's purchase can be the biggest transaction many people could ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to pull it all off.

Practically all the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the transaction. The title company makes sure that all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller.

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 in line with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Ric Haskew will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the property, the inspection often entails 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 property.

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

Replacement Cost

This is where the appraiser uses information on local construction costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. 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 are more accurately in line with the features of subject property.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace 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.

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 Ric Haskew, we are an authority when it comes to knowing the value of particular items in Albuquerque and Bernalillo County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the best indication of what a house is worth, it may not be the final sales price. Depending on the individual 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.But the appraised value is often employed 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 sell the property again. The bottom line is, an appraiser from Ric Haskew will help you attain the most accurate property value, so you can make profitable real estate decisions.