Understanding Appraisals

Getting a house is the largest transaction many people will ever make. Whether it's a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

You're likely to be familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the transaction. And ensuring all requirements of the sale are completed and that the title is clear to transfer 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 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 estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Wilborn Appraisals will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first duty at Wilborn Appraisals is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

Once the site has been inspected, 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.

Cost Approach

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

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home 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 are more accurately in line with the features of subject.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • 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.

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. At Wilborn Appraisals, we are experts in knowing the worth of particular items in Columbia and Richland County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of income the property generates is factored in with income produced by comparable properties to derive the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. 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. Regardless, 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 Wilborn Appraisals will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.