Home Appraisals: A Primer

Getting a home can be the most important financial decision some may ever encounter. It doesn't matter if it's a primary residence, a seasonal vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.


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Most of the participants are quite familiar. The most known face in the exchange is the real estate agent. Next, the lender provides the money required to bankroll the transaction. Ensuring all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.

So what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Indiana licensed appraiser from www.ekappraisalservices.com will ensure you as an interested party are informed.

Inspecting the subject property

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage is accurate and document the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser uses information on local construction costs, labor rates and other elements to calculate 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. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.

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.
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.

When it comes to knowing the true value of features of homes in Vincennes and Knox, www.ekappraisalservices.com is second to none. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this situation, the amount of revenue the real estate produces is factored in with income produced by neighboring properties to derive the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property could sell for in an open market. 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 used 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 put the property on the market again. Here's what it all boils down to: An appraiser from www.ekappraisalservices.com will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.