Breaking Down the Appraisals

Getting a house is the most serious investment some of us could ever encounter. It doesn't matter if it's a main residence, a second vacation property or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert 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.


You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the financial capital needed to bankroll the deal. The title company ensures that all areas of the transaction are completed and that the title is clear to pass from the seller to the buyer.

So what party makes sure the value of the real estate is in line with the purchase price?   This is where the appraiser comes in.   We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Idaho Falls, Rexburg, or Rigby Idaho licensed appraiser from Dixon Appraisal Services will ensure you as an interested party are informed.

Appraisals begin with the inspection

Our first responsibility at Dixon Appraisal Services is to inspect the property to determine its true status. 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 are there and are in the condition a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. We thoroughly understand the value of particular features to the residents of Idaho Falls, Rexburg, and Rigby, Idaho. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter 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.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. This approach to value is most often awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when an area has a reasonable number of rental 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 derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a house would sell for in an open market, it may not be the price at which the property closes. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. But the appraised value is typically 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 Dixon Appraisal Services will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.