Home Appraisals: A Primer

One's home purchase is the most significant transaction most might ever consider. Whether it's a main residence, a second vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.


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Practically all the participants are quite familiar. The real estate agent is the most familiar person in the transaction. Then, the mortgage company provides the financial capital required to finance the exchange. The title company makes sure that all areas of the transaction are completed and that a clear title transfers from the seller to the buyer.

So what party is responsible for making sure the value of the property is consistent with the purchase price? In comes 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 Ohio licensed appraiser from Adkins Appraisal Co. will ensure you as an interested party are informed.

Appraisals start with the home inspection

Our first responsibility at Adkins Appraisal Co. is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

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

Replacement Cost

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

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. We innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject property.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath 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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the most reliable indication of what a property would sell for in an open market, 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 typically employed 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. The bottom line is: An appraiser from Adkins Appraisal Co. will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.