A Description of the Appraisal Process

Their home's purchase is the biggest investment many people could ever make. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.

Most of the participants are quite familiar. The most known face in the exchange is the real estate agent. Next, the bank provides the money needed to fund the exchange. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the purchaser 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 is responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. 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 Newport Appraisal Company will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at Newport Appraisal Company is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser gathers information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system 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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Sand Springs and Tulsa, Newport Appraisal Company can't be beat. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the real estate produces is factored in with income produced by neighboring properties to determine the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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 Newport Appraisal Company will help you discover the most accurate property value, so you can make wise real estate decisions.