Decoding the Appraisal Process

One's home purchase can be the most serious investment many will ever make. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is a complex financial 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 probably familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the exchange. Next, the mortgage company provides the financial capital necessary to fund the deal. The title company sees to it that all details of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

So what party is responsible for making sure the real estate is consistent with the purchase price?   In comes the appraiser.   We provide an unbiased estimate 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 Pennsylvania licensed appraiser from Brian Hawley Appraisals will ensure you as an interested party are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

Next, after the inspection, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser analyzes information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • If, for example, the comparable 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.
  • However, 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.
At Brian Hawley Appraisals, we are experts when it comes to knowing the value of particular items in Allentown and Lehigh County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a home 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 property. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to derive 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. It is important to note that while this amount is probably the most accurate indication of what a house would sell for in an open market, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. At the end of the day: An appraiser from Brian Hawley Appraisals will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.