What Is an Appraisal?

Their home's purchase can be the most important financial decision most could ever encounter. It doesn't matter if where you raise your family, a second vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the exchange is the real estate agent. Next, the lender provides the money required to bankroll the deal. The title company ensures that all areas 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 real estate is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Metro One Appraisals Inc will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our responsibility 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 truly exist and are in the shape a typical 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 amenities - or defects - that would have an impact on the value of the house.

Next, after the inspection, an appraiser uses 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

Here, the appraiser gathers information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. 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 are more accurately in line with the features of subject property.

For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
However, 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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Metro One Appraisals Inc, we are an authority when it comes to knowing the worth of particular items in Andover and Anoka County neighborhoods. This approach to value is typically given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of income the real estate generates is factored in with income produced by nearby properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. 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 what a property is worth. Depending 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.Regardless, 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. It all comes down to this, an appraiser from Metro One Appraisals Inc will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.