Understanding the Appraisal Process

Getting a home can be the most significant transaction many of us could ever consider. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.

Practically all the participants are very familiar. The most recognizable person in the exchange is the real estate agent. Then, the bank provides the money necessary to finance the transaction. And ensuring all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? 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 Professional Appraisal Services, LLC. of Maryland will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first task at Professional Appraisal Services, LLC. of Maryland is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser gathers information on local building costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject 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 property.

  • For example, if the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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 Professional Appraisal Services, LLC. of Maryland, we are experts in knowing the value of real estate features in Ellicott City and Howard County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. 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 put the property on the market again. At the end of the day, an appraiser from Professional Appraisal Services, LLC. of Maryland will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.