Home Appraisals: A Primer

A home purchase can be the biggest financial decision most people will ever encounter. Whether it's where you raise your family, a second vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.

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


The majority of the people participating are very familiar. The most familiar person in the transaction is the real estate agent. Then, the lender provides the money necessary to fund the transaction. The title company makes sure that all details of the transaction are completed and that a clear title passes to the buyer from the seller.

So who's responsible for making sure the value of the property is consistent with the amount being paid?   In comes the appraiser.   We provide an unbiased estimate 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 Colorado licensed appraiser from Springs Appraisals will ensure you as an interested party are informed.

Appraisals start with the property inspection

To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Next, 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.

Cost Approach

Here, we analyze information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional 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.

  • If, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace 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 associating a value with features of homes in Colorado Springs and El Paso, Springs Appraisals can't be beat. This approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes used when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to determine the current value.

Coming Up With the Final Value

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a property would sell for in an open market, it probably will 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 typically 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. The bottom line is: An appraiser from Springs Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.
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