Real Property Appraisals: A Primer

Purchasing a house is the largest investment some people might ever make. It doesn't matter if a main residence, a seasonal vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.

The majority of the participants are very familiar. The real estate agent is the most known person in the exchange. Next, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all areas of the sale are completed and that the title is clear to transfer 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, who's responsible for making sure the property is worth the purchase price? In comes 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 Accuquick Appraisal will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first duty at Accuquick Appraisal 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 truly exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses 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, the appraiser uses information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions 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 remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Accuquick Appraisal, we are experts when it comes to knowing the worth of real estate features in Portland and Multnomah County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. It'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'. But 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. Here's what it all boils down to, an appraiser from Accuquick Appraisal will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.