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A home purchase is the largest, single investment most people will ever make. Whether it's a primary residence, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

Most of the people involved are very familiar. The Realtor is the most common face of the transaction. The mortgage company provides the financial capital necessary to fund the transaction. The title company ensures that all aspects of the transaction are completed and that a clear title passes from the seller to the buyer.

So who makes sure the value of the property is in line with the amount being paid?  This is where the appraisal comes in. An appraisal is 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. To be an informed party, most people turn to a licensed, certified, professional appraiser to provide them with the most accurate estimate of the true value of their property.

The Inspection
So what goes into a real estate appraisal? It all starts with the inspection. It is our duty at Cornerstone Appraisal Services to inspect the property being appraised to ascertain the true status of that property.

The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, our appraisers typically use two or three approaches to determining the value of real property: a cost approach, a sales comparison and, in the case of a rental property, an income approach.

Cost Approach
We use information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. Why would you pay more for an existing property if you could spend less and build a brand new home instead?

Sales Comparison
We know the neighborhoods in which we work; the traffic patterns, the school zones, the busy throughways; and we use this information to determine which attributes of a property will make a difference in the value.

Then, the we research recent sales in the vicinity and finds properties which are ''comparable'' to the subject being appraised. The sales prices of these properties are used as a basis to begin the sales comparison approach.

In the case of income producing properties - rental houses for example - we may use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future.

Reconciliation
Combining information from all approaches, the appraiser is then ready to form an opinion of market value for the subject property. The appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth.