What Are the Components of an Appraisal?

Their home's purchase can be the most important transaction some may ever make. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

Practically all the participants are quite familiar. The real estate agent is the most recognizable person in the exchange. Then, the lender provides the financial capital needed to fund the deal. The title company ensures that all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

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

So, what party is responsible for making sure the property is worth the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from A-1 Appraisal Service will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at A-1 Appraisal Service is to inspect the property to ascertain its true status. We must actually view aspects of the property, 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 square footage is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser pulls information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property 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.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At A-1 Appraisal Service, we are an authority in knowing the worth of particular items in Lafayette and Lafayette County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing a property. In this situation, the amount of revenue the property yields is factored in with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 sell the property again. It all comes down to this, an appraiser from A-1 Appraisal Service will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.