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Understanding the Appraisal Process

Acquiring a house is the most serious investment many might ever encounter. It doesn't matter if it's where you raise your family, a second vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties 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 probably familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the transaction. Next, the mortgage company provides the money required to finance the exchange. Ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.

So who's responsible for making sure the real estate is consistent with the amount being paid?   This is where the appraiser comes in.   We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Pennsylvania licensed appraiser from Frederick & Company will ensure you as an interested party are informed.

Appraisals start with the inspection

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

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

Cost Approach

This is where we pull information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
When it comes to valuing features of homes in Pittsburgh and Allegheny, Frederick & Company is your local authority. This approach to value is most often given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a property would sell for in an open market, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. It all comes down to this: An appraiser from Frederick & Company will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.