Home Appraisals: A Primer

Getting a home can be the largest investment most people may ever encounter. It doesn't matter if it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.


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

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the mortgage company provides the financial capital needed to bankroll the transaction. Ensuring all details of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

So what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet 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 Kentucky licensed appraiser from Michael Aytes will ensure you as an interested party are informed.

Appraisals start with the inspection

Our first task at Michael Aytes is to inspect the property to determine its true status. We must physically see 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 typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.

Back at the office, we use 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.

Replacement Cost

Here, the appraiser pulls information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, additional 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 more accurately portray the features of subject.

For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system 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.

When it comes to knowing the true value of features of homes in Villa Hills and Kenton, Michael Aytes can't be beat. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of revenue the real estate yields is factored in with income produced by nearby properties to derive the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's market value Prices 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 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. Here's what it all boils down to: An appraiser from Michael Aytes will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.