A Description of the Appraisal Process

One's home purchase is the most important investment some might ever encounter. It doesn't matter if it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

It's likely you are familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Then, the bank provides the financial capital required to fund the transaction. The title company makes sure that all aspects of the sale are completed and that a clear title passes from the seller to the purchaser.

So who makes sure the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Michigan licensed appraiser from Market Appraisal Company will ensure you as an interested party are informed.

Appraisals start with the home inspection

To ascertain an accurate 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 condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser analyzes information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the communities in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace 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.

At Market Appraisal Company, we are experts when it comes to knowing the value of real estate features in Grand Rapids and Kent County neighborhoods. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this scenario, the amount of income the property yields is factored in with income produced by comparable properties to derive 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 property in question. It is important to note that while the appraised value is probably the best indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. Depending on the individual situations 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 often 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 Market Appraisal Company will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.