What goes into an appraisal?

Purchasing a home is the most serious transaction most of us could ever encounter. Whether it's a primary residence, a seasonal vacation home 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.

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


Most people are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the money required to finance the deal. The title company sees to it that all aspects of the transaction are completed and that a clear title transfers from the seller to the purchaser.

So who's responsible for making 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 Indiana licensed appraiser from Hanlin Real Estate Service will ensure you as an interested party are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, 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 affect the value of the property.

Following the inspection, we use 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.

Cost Approach

Here, we pull information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the communities in which they work. We innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • But, 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 Hanlin Real Estate Service, we are experts in knowing the value of particular items in Pennville and Jay County neighborhoods. This 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 way of valuing a property is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with income produced by nearby properties to give an indicator of 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 at hand. The estimate of value on the appraisal report is not necessarily the final sales price 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 the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is: An appraiser from Hanlin Real Estate Service will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.