What Goes Into an Appraisal?

A home purchase can be the most serious transaction most of us could ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the transaction. Then, the mortgage company provides the financial capital necessary to finance the deal. And the title company makes sure that all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser.

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 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 STEVEN GIANNINI & ASSOCIATES will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at STEVEN GIANNINI & ASSOCIATES is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.

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

Cost Approach

Here, we pull information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of 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 are more accurately in line with the features of subject.

  • If, 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.
  • 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.

Once all necessary adjustments have been made, 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 Glen Ellyn and Dupage, STEVEN GIANNINI & ASSOCIATES is second to none. The sales comparison approach to value is usually given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property generates is factored in with income produced by nearby properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 a property's valuePrices can always 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 the property is actually worth. The bottom line is, an appraiser from STEVEN GIANNINI & ASSOCIATES will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.