Making Sense of the Appraisal Process

Buying real estate can be the most serious financial decision many people might ever consider. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

The majority of the people participating are quite familiar. The most known entity in the exchange is the real estate agent. Then, the bank provides the financial capital required to finance the transaction. And ensuring all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, who's responsible for making sure the property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 DLC Appraisal Services, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at DLC Appraisal Services, LLC is to inspect the property to ascertain its true status. We must physically see features, 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 person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, 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.

Cost Approach

This is where we analyze information on local construction costs, labor rates and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers are intimately familiar with 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 property in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, 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 property.

  • Say, for example, the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At DLC Appraisal Services, LLC, we are an authority in knowing the worth of particular items in the northern Louisiana neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a house is sometimes employed 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 income produced by neighboring properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all 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 most reliable indication of what a house is worth, it probably will not be the final sales price. It's not uncommon for prices to 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 the property is actually worth. Here's what it all boils down to, an appraiser from DLC Appraisal Services, LLC will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.