Understanding Appraisals

Acquiring a home is the most important transaction most people may ever make. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.


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Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the lender provides the money needed to bankroll the deal. Ensuring all areas of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

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 could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Minnesota licensed appraiser from R.A. Field and Associates will ensure you as an interested party are informed.

Appraisals start with the property inspection

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper 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.

Back at the office, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser gathers information on local building costs, labor rates and other elements to calculate how much it would cost to build a property similar to the one being appraised. This value often 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 can tell you a lot about the subdivisions in which they work. We innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

Say, for example, the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

At R.A. Field and Associates, we are an authority in knowing the value of real estate features in Ham Lake and Anoka County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a reasonable number of renter occupied properties. In this case, the amount of income the real estate generates is factored in with income produced by neighboring properties to determine the current value.

Coming Up With the Final Value

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 Depending on the individual situations 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 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. At the end of the day: An appraiser from R.A. Field and Associates will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.