Comprehending Appraisals

Getting a house can be the biggest investment most may ever make. Whether it's a primary residence, a seasonal vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the exchange. Then, the mortgage company provides the financial capital necessary to finance the deal. And ensuring all requirements of the exchange 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, what party is responsible for making 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 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 CDM Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at CDM Appraisals is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

After 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.

Replacement Cost

Here, we gather information on local building costs, the cost of labor and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra 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.

  • For example, if the comparable 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, 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 true 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 valuing features of homes in Omaha and Douglas, CDM Appraisals is second to none. This approach to value is commonly awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the property yields is taken into consideration along with income produced by similar properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But 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. At the end of the day, an appraiser from CDM Appraisals will help you get the most accurate property value, so you can make the most informed real estate decisions.