Decoding the Appraisal Process

A home purchase is the largest investment some will ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert 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 recognizable entity in the exchange. Then, the bank provides the financial capital needed to fund the transaction. And ensuring all requirements of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.

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So, what party makes sure the value of the real estate is in line with the purchase price? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Norris-Thomas Appraisal Service will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first responsibility at Norris-Thomas Appraisal Service is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, an appraiser uses 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

Here, we analyze information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This figure usually sets the maximum 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 thoroughly understand the value of specific features to the residents 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. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray the features of subject property.

For example, if 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 has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Norris-Thomas Appraisal Service, we are an authority when it comes to knowing the worth of real estate features in Green Bay and Brown County neighborhoods. The sales comparison approach to value is usually given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of income the real estate generates is factored in with income produced by similar properties to derive the current value.

Coming Up With The Final Value

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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 case they had to sell the property again. At the end of the day, an appraiser from Norris-Thomas Appraisal Service will help you get the most fair and balanced property value, so you can make wise real estate decisions.