Breaking Down the Appraisals

Buying real estate is the most important financial decision many could ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

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


Most of the people participating are quite familiar. The real estate agent is the most recognizable entity in the transaction. Next, the lender provides the money required to bankroll the exchange. Ensuring all areas of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.

So who makes sure the value of the real estate is in line with the amount being paid?   This is where the appraiser comes in.   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 professional Arizona licensed appraiser from Northern Arizona Appraisal, Inc. will ensure you as an interested party are informed.

Inspecting the subject property

Our first responsibility at Northern Arizona Appraisal, Inc. is to inspect the property to ascertain 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 are present and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

After the inspection, we use 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, we gather information on local building costs, the cost of labor and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly 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 are intimately familiar with the communities in which they work. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has a storm shelter and the subject does not, the appraiser may deduct 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.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this situation, the amount of income the property yields is factored in with income produced by nearby properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property could sell for in an open market. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Northern Arizona Appraisal, Inc. will guarantee you get the most accurate property value, so you can make profitable real estate decisions.