What is an appraisal?

A home purchase is the most serious financial decision many of us will ever make. Whether it's a main residence, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.


	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 having a role in the transaction. The most recognizable entity in the transaction is the real estate agent. Next, the mortgage company provides the financial capital necessary to fund the deal. The title company sees to it that all aspects of the exchange are completed and that a clear title passes to the buyer from the seller.

So what party makes sure the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Montana licensed appraiser from Darwin Ernst Appraisal Services, Inc. will ensure you as an interested party are informed.

Inspecting the subject property

Our first responsibility at Darwin Ernst Appraisal Services, Inc. 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, amenities, etc., to ensure they indeed exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we use information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as upgraded appliances, additional 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.

For example, if the comparable property 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 home.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

At Darwin Ernst Appraisal Services, Inc., we are experts when it comes to knowing the value of real estate features in Hamilton and Ravalli County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this case, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the most reliable indication of what a house would sell for in an open market, it probably will 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. Regardless, 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. It all comes down to this: An appraiser from Darwin Ernst Appraisal Services, Inc. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.