What Is an Appraisal?

Their home's purchase can be the biggest financial decision most will ever make. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the lender provides the financial capital needed to fund the deal. And ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

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 value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Mannion Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Mannion Appraisals is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist 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 property, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

After the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we pull information on local construction costs, labor rates and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They thoroughly 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 property in question. 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 more accurately match the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Mannion Appraisals, we are experts in knowing the worth of particular items in Oak Lawn and Cook County neighborhoods. This approach to value is usually awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes employed when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount 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'. 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 get back in case they had to put the property on the market again. The bottom line is, an appraiser from Mannion Appraisals will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.