A Description of the Appraisal Process

Acquiring a house can be the most important transaction some people could ever consider. It doesn't matter if a primary residence, an additional vacation property or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.

Most people are familiar with the parties taking part in the transaction. The most familiar face in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to fund the exchange. And ensuring all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.

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

So, who makes sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Gillispie Appraisal Services will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at Gillispie Appraisal Services is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Next, after the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

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

Paired Sales Analysis

Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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 doesn't, the appraiser may deduct the value of that half bath 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.

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. At Gillispie Appraisal Services, we are experts in knowing the value of particular items in Pueblo and Pueblo County neighborhoods. The sales comparison approach to value is most often awarded 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 - the appraiser may use a third approach to value. In this situation, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 is actually worth. At the end of the day, an appraiser from Gillispie Appraisal Services will help you get the most accurate property value, so you can make profitable real estate decisions.