Understanding Appraisals

One's home purchase can be the most serious transaction some might ever make. It doesn't matter if it's where you raise your family, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.


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Most of the participants are very familiar. The real estate agent is the most familiar face in the transaction. Then, the lender provides the financial capital necessary to finance the deal. The title company sees to it that all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

So what party makes sure 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 parcel of real estate, where both buyer and seller are informed parties. A professional Illinois licensed appraiser from Sticks & Bricks Appraisal Services Ltd. will ensure you as an interested party are informed.

Appraisals start with the inspection

Our first responsibility at Sticks & Bricks Appraisal Services Ltd. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

After the inspection, an appraiser employs 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 analyze information on local building costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

Say, for example, the comparable property 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.
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 Sticks & Bricks Appraisal Services Ltd., we are an authority when it comes to knowing the value of particular items in Des Plaines and Cook County neighborhoods. This approach to value is commonly awarded the most weight 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 - the appraiser may use a third approach to value. In this scenario, the amount of income the real estate generates is taken into consideration along 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 put down 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 Depending on the individual 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. 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 Sticks & Bricks Appraisal Services Ltd. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.