Real Estate Appraisals: A Primer

Purchasing a house is the biggest investment some could ever consider. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.


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Most of the people involved are quite familiar. The most known person in the transaction is the real estate agent. Then, the bank provides the financial capital required to fund the deal. Ensuring all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.

So who's responsible for making sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. 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 Massachusetts licensed appraiser from Pemberton Appraisal Company will ensure you as an interested party are informed.

Inspecting the subject property

Our first duty at Pemberton Appraisal Company is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and document the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

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

Replacement Cost

Here, the appraiser gathers information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to build a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. 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 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 a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
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.

When it comes to valuing features of homes in Weston and Middlesex, Pemberton Appraisal Company can't be beat. This approach to value is usually awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of revenue the property yields is factored in with income produced by similar properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 they could get back in the event they had to sell the property again. Here's what it all boils down to: An appraiser from Pemberton Appraisal Company will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.