Understanding the Appraisal Process

One's home purchase can be the largest financial decision some may ever consider. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.


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Most of the participants are very familiar. The most familiar person in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to bankroll the transaction. Ensuring all details of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

So who makes sure the value of the real estate is consistent 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 property, where both buyer and seller are informed parties. A professional Oregon licensed appraiser from Courtney Appraisal will ensure you as an interested party are informed.

Inspecting the subject property

Our first task at Courtney Appraisal 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, amenities, etc., to ensure they indeed are there and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property is accurate and document the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches when 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 building costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This value 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 can tell you a lot about the subdivisions in which they appraise. We innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood 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 extra 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 an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
However, if the subject 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 most often awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's value 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. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to: An appraiser from Courtney Appraisal will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.