Making Sense of the Appraisal Process

One's home purchase is the most significant financial decision many of us might ever make. It doesn't matter if it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.


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Most people are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Then, the bank provides the financial capital required to bankroll the exchange. Ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

So who's responsible for making sure the value of the real estate is consistent with 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 property, where both buyer and seller are informed parties. A professional Pennsylvania licensed appraiser from Champagne Appraisal Services will ensure you as an interested party are informed.

Inspecting the subject property

Our first duty at Champagne Appraisal Services is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local building costs, the cost of labor and other elements to derive how much it would cost to build a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject property.

For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
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.

An opinion 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 usually awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property would sell for in an open market, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed 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. It all comes down to this: An appraiser from Champagne Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.