What Is an Appraisal?

Acquiring a home is the most serious transaction some of us will ever make. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the exchange. Next, the bank provides the financial capital necessary to fund the deal. And the title company ensures that all areas of the transaction are completed and that a clear title passes to the buyer from the seller.

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So, who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. 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 IAS Appraisals (773) 557-9826 will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first perform 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 reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - 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: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This value 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 are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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 property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain 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. When it comes to associating a value with features of homes in Chicago and Cook, IAS Appraisals (773) 557-9826 is second to none. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. Depending on the specific 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from IAS Appraisals (773) 557-9826 will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.