profile picture

Home Appraisals: A Primer

Their home's purchase can be the most important transaction some of us could ever consider. It doesn't matter if a main residence, a seasonal vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.

Most of the people participating are very familiar. The real estate agent is the most familiar face in the exchange. Next, the mortgage company provides the money required to finance the transaction. And the title company makes sure that all details of the exchange are completed and that a clear title passes to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

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 estimate 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 Frigoletto & Associates Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at Frigoletto & Associates Inc. is to inspect the property to determine 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 are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to 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 the appraiser uses information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property similar to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly 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 home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • However, 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 Frigoletto & Associates Inc., we are an authority when it comes to knowing the value of real estate features in Leominster and Worcester County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this situation, the amount of income the property yields is factored in with income produced by neighboring properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the individual 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.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 recover in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Frigoletto & Associates Inc. will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.