What Is an Appraisal?

Their home's purchase is the biggest transaction many will ever encounter. It doesn't matter if a main residence, an additional vacation property 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.

The majority of the participants are very familiar. The most recognizable face in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to bankroll the transaction. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.

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So, what party is responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 BQS Realty Inc Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser pulls information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as square footage, extra 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 an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. When it comes to knowing the true worth of features of homes in Chicago and Cook, BQS Realty Inc Appraisals is second to none. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the property generates is factored in with income produced by similar properties to determine the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. 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'. But 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 sell the property again. Here's what it all boils down to, an appraiser from BQS Realty Inc Appraisals will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.