Understanding the Appraisal Process

Getting a house can be the largest investment many will ever consider. It doesn't matter if it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is a complex 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 taking part in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the lender provides the money required to bankroll the transaction. Ensuring all areas of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.

So who makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. 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 professional Pennsylvania licensed appraiser from Kathy A. Marks Appraisals will ensure you as an interested party are informed.

Appraisals begin with the property inspection

To determine an accurate 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, amenities, etc., to ensure they indeed are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, 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 pull information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure commonly 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 subdivisions in which they appraise. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.

For example, if the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often employed 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 put the property on the market again. The bottom line is: An appraiser from Kathy A. Marks Appraisals will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.