Decoding the Appraisal Process

Buying real estate can be the largest transaction many of us could ever make. It doesn't matter if it's where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

Most people are familiar with the parties having a role in the transaction. The most known face in the exchange is the real estate agent. Then, the lender provides the money needed to finance the transaction. Ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

So what party makes sure the property 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 property, where both buyer and seller are informed parties. A professional Michigan licensed appraiser from K.W. APPRAISALS, LLC will ensure you as an interested party are informed.

Appraisals begin with the inspection

Our first task at K.W. APPRAISALS, LLC is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to 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 property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
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.

At K.W. APPRAISALS, LLC, we are an authority when it comes to knowing the value of real estate features in East Grand Rapids and Roscommon County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

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

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a property would sell for in an open market, 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from K.W. APPRAISALS, LLC will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.