A Description of the Appraisal Process

Purchasing a house is the most significant financial decision most people might ever consider. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

The majority of the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to bankroll the transaction. And ensuring all requirements of the sale 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 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 BBG, Inc will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical buyer 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 identify any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser pulls information on local construction costs, the cost of labor and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional 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.

  • If, for example, 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.

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 BBG, Inc, we are an authority when it comes to knowing the value of particular items in Lithia and Hillsborough County neighborhoods. This approach to value is commonly awarded the most importance 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 a third way of valuing a property. 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.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices 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 is actually worth. The bottom line is, an appraiser from BBG, Inc will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.