Breaking Down the the Appraisal Process

Acquiring real estate is the biggest transaction some may ever make. It doesn't matter if it's a primary residence, a second vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.


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The majority of the parties involved are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the bank provides the money required to finance the deal. The title company makes sure that all aspects of the sale are completed and that a clear title passes to the buyer from the seller.

So what party is responsible for making sure the property is consistent with the purchase price? In comes the appraiser. 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 Montana certified appraiser from Sapphire Appraisal, Inc. will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we pull information on local building costs, labor rates and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they work. We innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray 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.
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 Sapphire Appraisal, Inc., we are experts in knowing the value of particular items in Stevensville and Ravalli County neighborhoods. This approach to value is typically awarded the most importance 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 a third way of valuing a house. In this case, the amount of revenue the property produces is factored in with income produced by similar properties to give an indicator of the current value.

Coming Up With the Final Value

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 always the final sales price even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final 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 the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Sapphire Appraisal, Inc. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.