What Is an Appraisal?

Buying real estate is the most significant investment many might ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the exchange. And ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, what party makes sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 licensed, certified, professional appraiser from Benchmark Appraisals of Kansas will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Benchmark Appraisals of Kansas is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • 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.

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. At Benchmark Appraisals of Kansas, we are an authority in knowing the value of particular items in Arcadia and Crawford County neighborhoods. The sales comparison approach to value is usually given 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 approach to value. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of 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. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed 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 Benchmark Appraisals of Kansas will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.