Understanding Appraisals

Buying a home is the most serious financial decision many people may ever encounter. Whether it's a primary residence, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

You're probably familiar with the parties taking part in the transaction. The most known face in the transaction is the real estate agent. Next, the mortgage company provides the money required to bankroll the exchange. And ensuring all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser 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 property is worth the purchase price? This is where you meet 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 Timeline Appraisal Services, LLC 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 perform a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical person 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 features - or defects - that would have an impact on the value of the property.

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

Replacement Cost

This is where we analyze information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of particular 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 real estate being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.

  • Say, for example, the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
  • But, 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 Timeline Appraisal Services, LLC, we are experts when it comes to knowing the value of real estate features in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a home 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 real estate. In this situation, the amount of income the property produces is factored in with income produced by similar properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it may not be the final sales price. 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'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Timeline Appraisal Services, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.