What is an appraisal?

Getting a home can be the largest financial decision some people may ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to see it through.


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Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the financial capital necessary to bankroll the deal. The title company sees to it that all areas of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

So what party makes sure the property 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 Idaho licensed appraiser from Lynn E. Peterson 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 responsibility to first conduct a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often requires creating a sketch of the floor plan. 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 the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we pull information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

If, for example, the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace 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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. This approach to value is typically awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With the Final Value

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's market value It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 Lynn E. Peterson will guarantee you attain the most accurate property value, so you can make wise real estate decisions.