What goes into an appraisal?

One's home purchase is the biggest financial decision some people could ever encounter. It doesn't matter if it's a main residence, an additional vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.


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Practically all the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Next, the lender provides the money needed to finance the exchange. Ensuring all areas of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.

So who makes sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Ohio licensed appraiser from Charles W. Flagg & Company, Inc. will ensure you as an interested party are informed.

Appraisals start with the home inspection

Our first duty at Charles W. Flagg & Company, Inc. is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

If, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
But, 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.

When it comes to associating a value with features of homes in Hudson and Summit, Charles W. Flagg & Company, Inc. is your local authority. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home 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 scenario, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Charles W. Flagg & Company, Inc. will help you attain the most accurate property value, so you can make wise real estate decisions.