Breaking Down the the Appraisal Process

A home purchase is the largest transaction most people will ever encounter. Whether it's a primary residence, a second vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.

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


You're likely to be familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Then, the lender provides the money required to fund the exchange. The title company makes sure that all details of the sale are completed and that a clear title passes from the seller to the buyer.

So what party is responsible for making sure the value of the real estate is consistent with the amount being paid?   In comes the appraiser.   We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Wisconsin licensed appraiser from Active Appraisal Services, Inc. will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use 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 the appraiser pulls information on local building costs, labor rates and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a house. In this case, the amount of income the real estate generates 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 applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a property would sell for in an open market, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often 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 Active Appraisal Services, Inc. will help you discover the most fair and balanced property value, so you can make wise real estate decisions.