Making Sense of the Appraisal Process

Buying a home is the biggest transaction most may ever consider. It doesn't matter if it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.


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It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the financial capital necessary to finance the deal. Ensuring all areas of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.

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 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 Oregon licensed appraiser from Dave Still Inc. dba: Northwest Appraisal Services will ensure you as an interested party are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first complete 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 really exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, 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 affect the value of the property.

Back at the office, an appraiser employs two or three approaches when 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 analyze information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they appraise. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, 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 extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath 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. This approach to value is typically given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a house would sell for in an open market, it probably will not be the final sales price. Depending on the specific situations 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. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is: An appraiser from Dave Still Inc. dba: Northwest Appraisal Services will guarantee you attain the most accurate property value, so you can make wise real estate decisions.