Decoding the Appraisal Process

Buying a home is the largest investment some people will ever make. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.

You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most familiar person in the exchange. Then, the lender provides the money required to finance the exchange. And the title company ensures that all details of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Coconino Appraisal Service will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

To ascertain the true status of the property, it's our responsibility to first conduct 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 indeed are present and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

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

Cost Approach

Here, we gather information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of 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 are more accurately in line with the features of subject property.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace 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. At Coconino Appraisal Service, we are experts in knowing the value of real estate features in Flagstaff and Coconino County neighborhoods. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property produces is taken into consideration along with income produced by similar properties to determine the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on 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 valueDepending on the individual circumstances 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.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. Here's what it all boils down to, an appraiser from Coconino Appraisal Service will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.