Comprehending Appraisals

Getting a house is the most important transaction some of us could ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.

The majority of the people involved are quite familiar. The real estate agent is the most known entity in the exchange. Then, the mortgage company provides the financial capital required to bankroll the deal. The title company ensures that all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller.

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? This is where the appraiser comes in. 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 CDM Appraisals will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper 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.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser uses information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This figure often 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 communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, 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.
  • 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 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. At CDM Appraisals, we are experts when it comes to knowing the worth of real estate features in Omaha and Douglas County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the property produces is factored in with income produced by similar properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending on the specific circumstances 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 often 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 CDM Appraisals will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.