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An appraisal is an unbiased estimate of what a buyer might expect to pay - or a seller receives - for a parcel of real estate, where both buyer and seller are informed parties. To be an informed party, most people turn to a licensed, certified, professional appraiser to provide them with the most accurate estimate of the true value of their property.
The Inspection
Blue Line Appraisal Service, LLC is responsible to inspect the property being appraised to ascertain the true status of that property. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, we looks for any obvious features - or defects - that would affect the value of the house.
Once inspected, we use two or three approaches to determining the value of real property: a cost approach, a sales comparison and, in the case of a rental property, an income approach.
Cost Approach
The cost approach is the easiest to understand. Blue Line Appraisal Service, LLC uses information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. While there may be mitigating factors, such as location and amenities, these are usually not reflected in the cost approach.
Sales Comparison
Instead, we rely on the sales comparison approach to value these types of items. We know the neighborhoods in which we work. Our appraisers understand the value of certain features to the residents of that area, the traffic patterns, the school zones, the busy throughways. We use this information to determine which attributes of a property will make a difference in the value and assist us in researching recent sales in the vicinity to find properties which are ''comparable'' to the subject being appraised.
Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), the comparable properties are adjusted to more accurately portray the subject property.
In the case of income producing properties - rental houses for example - we use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future.
Reconciliation
Combining information from all approaches, we are then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. The appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is: an appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.
