Home Appraisals: A Primer

Getting a home can be the biggest investment most of us may ever encounter. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.

Practically all the participants are very familiar. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the money necessary to fund the transaction. The title company sees to it that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.

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 real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Green Mountain Valuations will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

After the inspection, we use two or three approaches to 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

This is where the appraiser uses information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property 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.

  • For example, if 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.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Burlington and Chittenden, Green Mountain Valuations can't be beat. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the price at which the property closes. Prices 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 typically 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 Green Mountain Valuations will help you get the most accurate property value, so you can make wise real estate decisions.