Home Appraisals: A Primer

Purchasing a house can be the largest financial decision many people might ever make. It doesn't matter if a main residence, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.

Most of the participants are quite familiar. The most known face in the exchange is the real estate agent. Next, the mortgage company provides the money necessary to fund the transaction. And ensuring all requirements of the transaction are completed and that a clear title passes to the buyer from the seller 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, who's responsible for making sure the value of the property is in line 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 North Country Appraisers will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at North Country Appraisers 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 are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, we pull information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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 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 home.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Wolfeboro and Carroll, North Country Appraisers is your local authority. The sales comparison approach to value is typically given the most importance 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 property yields is factored in with income produced by comparable properties to determine the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 the property is actually worth. It all comes down to this, an appraiser from North Country Appraisers will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.