Understanding the Appraisal Process

Getting real estate can be the most serious investment most could ever encounter. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.


Most of the parties participating are quite familiar. The real estate agent is the most familiar face in the transaction. Then, the mortgage company provides the money required to fund the transaction. Ensuring all details of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.

So who's responsible for making sure the value of the property is in line with the purchase price?   In comes the appraiser.   We provide an unbiased estimate 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 North Carolina licensed appraiser from Michael Dodgin & Associates, LLC will ensure you as an interested party are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the shape a typical person would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

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

Cost Approach

Here, the appraiser uses information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one 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.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they work. We innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • If, for example, the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
At Michael Dodgin & Associates, LLC, we are experts in knowing the value of real estate features in Alexis and Gaston County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to determine the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a property would sell for in an open market, it may not be the price at which the property closes. 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 they could get back in the event they had to sell the property again. At the end of the day: An appraiser from Michael Dodgin & Associates, LLC will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.