Making Sense of the Appraisal Process

Purchasing a home can be the most significant transaction some of us will ever make. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.


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Practically all the people involved are quite familiar. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the financial capital required to finance the deal. Ensuring all details of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

So what party is responsible for making sure the real estate is consistent with the amount being paid? This is where you meet 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 Maine licensed appraiser from Amerifirst Appraisal Company, Inc. will ensure you as an interested party are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the condition a typical person would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, we use two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the communities in which they appraise. We innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to 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 are more accurately in line with the features of subject.

For example, if the comparable has a storm shelter and the subject doesn't, 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.

When it comes to putting a value on features of homes in Lewiston and Androscoggin, Amerifirst Appraisal Company, Inc. is second to none. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a house would sell for in an open market, it may not be the final sales price. Depending on the specific 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. Regardless, the appraised value is often 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. At the end of the day: An appraiser from Amerifirst Appraisal Company, Inc. will guarantee you get the most accurate property value, so you can make profitable real estate decisions.