What Goes Into an Appraisal?

Their home's purchase can be the largest investment many people may ever make. Whether it's a main residence, a second vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to see it through.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Then, the lender provides the money needed to bankroll the exchange. And the title company makes sure that all details of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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 property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Erica Dunn Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Erica Dunn Appraisals is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable 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, the appraiser identifies 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 real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.

For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
But, 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.

A valid estimate 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 putting a value on features of homes in Portland and Multnomah, Erica Dunn Appraisals is your local authority. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the strongest indication of what a property is worth, it probably will 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Erica Dunn Appraisals will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.