Home Appraisals: A Primer

Buying real estate can be the most significant investment some of us will ever consider. Whether it's a main residence, a second vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties 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.


The majority of the parties participating are quite familiar. The most familiar face in the transaction is the real estate agent. Then, the bank provides the money necessary to finance the transaction. Ensuring all areas of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.

So who makes sure the value of the property is consistent with the purchase price?   This is where the appraiser comes in.   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 Michigan licensed appraiser from H.J. Ford & Associates will ensure you as an interested party are informed.

Appraisals start with the property inspection

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a reasonable buyer 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, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, 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.

Replacement Cost

This is where the appraiser pulls information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as extra 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 a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate exchange.

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 situation, the amount of revenue the property yields is factored in with income produced by neighboring properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property could sell for in an open market. 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 often 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 put the property on the market again. It all comes down to this: An appraiser from H.J. Ford & Associates will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.