What Are the Parts of an Appraisal?

Buying real estate is the largest financial decision many of us could ever consider. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

Practically all the participants are very familiar. The most recognizable entity in the transaction is the real estate agent. Next, the mortgage company provides the financial capital needed to finance the exchange. The title company makes sure that all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, what party makes sure the value of the real estate 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 licensed, certified, professional appraiser from Adrian Real Estate Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser analyzes information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to 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 are more accurately in line with the features of subject property.

  • Say, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Camas and Clark, Adrian Real Estate Appraisal can't be beat. This approach to value is most often given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this situation, the amount of income the property yields is taken into consideration along with income produced by neighboring properties to derive the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. 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 valueDepending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 put the property on the market again. The bottom line is, an appraiser from Adrian Real Estate Appraisal will help you attain the most accurate property value, so you can make the most informed real estate decisions.