Making Sense of the Appraisal Process

Acquiring a house can be the largest financial decision many could ever encounter. It doesn't matter if a main residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.

The majority of the parties participating are very familiar. The most recognizable face in the exchange is the real estate agent. Then, the bank provides the money required to bankroll the transaction. And ensuring all aspects of the transaction are completed and that a clear title transfers from the seller to the buyer 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 value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from CQ Appraisals (571)216-3974 will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at CQ Appraisals (571)216-3974 is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, we use 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.

Replacement Cost

This is where we use information on local building costs, the cost of labor and other factors to derive how much it would cost to build a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 adjust the comparable properties so that they more accurately match the features of subject property.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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 CQ Appraisals (571)216-3974, we are an authority in knowing the worth of particular items in Frederick and Frederick County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document 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 final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 case they had to sell the property again. The bottom line is, an appraiser from CQ Appraisals (571)216-3974 will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.