Understanding Appraisals

Getting a home can be the largest transaction some may ever make. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known person in the exchange. Next, the lender provides the financial capital required to finance the deal. And ensuring all details of the transaction are completed and that a clear title transfers to the buyer from the seller 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 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Goedker Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Goedker Appraisal Services 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, living areas, etc, to ensure they indeed are present and are in the shape a reasonable 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 look for any obvious amenities - or defects - that would affect the value of the house.

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.

Cost Approach

Here, we analyze information on local construction costs, the cost of labor and other factors to determine how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as square footage, additional 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.

  • Say, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Goedker Appraisal Services, we are an authority in knowing the value of particular items in Baxter and Crow Wing County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Analyzing the data from all 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 the final sales price even though it is likely the best indication of what a property is worth. It's not uncommon for prices to 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 put the property on the market again. The bottom line is, an appraiser from Goedker Appraisal Services will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.