A Description of the Appraisal Process

Buying a house is the largest financial decision most of us may ever encounter. It doesn't matter if where you raise your family, an additional vacation property or an investment, purchasing real property is a complex 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 known person in the transaction. Then, the lender provides the money required to fund the transaction. And the title company ensures that all requirements of the exchange are completed and that a clear title transfers from the seller to the buyer.

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So, who makes sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could 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 Paul Votta will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Paul Votta is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the 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 analyzes information on local building costs, the cost of labor and other elements to figure out how much it would cost to construct a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Paul Votta, we are an authority in knowing the value of real estate features in Scranton and Lackawanna County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending 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.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 recover in the event they had to sell the property again. The bottom line is, an appraiser from Paul Votta will help you discover the most accurate property value, so you can make wise real estate decisions.