What Is an Appraisal?

Getting real estate can be the most important investment many of us could ever encounter. Whether it's a main residence, a second vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.

The majority of the people participating are very familiar. The real estate agent is the most recognizable face in the exchange. Then, the bank provides the money necessary to fund the deal. And the title company makes sure that all areas of the sale are completed and that the title is clear to transfer 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 consistent with the purchase price? 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 Quirk Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true 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, and so on, to ensure they truly are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we analyze 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 usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Fargo and Cass, Quirk Appraisals is second to none. This approach to value is most often given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a house is worth, 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'. 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 get back in case they had to put the property on the market again. The bottom line is, an appraiser from Quirk Appraisals will help you discover the most fair and balanced property value, so you can make wise real estate decisions.