Decoding the Appraisal Process

One's home purchase can be the most significant financial decision many people might ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.


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The majority of the parties participating are quite familiar. The real estate agent is the most known face in the transaction. Then, the mortgage company provides the financial capital required to finance the exchange. The title company makes sure that all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

So who makes sure the property is consistent with the amount being paid? This is where you meet 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 Colorado licensed appraiser from Ebert Appraisal Service will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., 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 proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, an appraiser employs 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 analyzes information on local building costs, labor rates and other elements to calculate 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. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

For example, if the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. This approach to value is commonly given the most weight when an appraisal is for a home purchase.

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 property produces is factored in with income produced by similar properties to derive the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the strongest indication of what a house would sell for in an open market, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often 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. Here's what it all boils down to: An appraiser from Ebert Appraisal Service will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.