What Are the Components of an Appraisal?

A home purchase can be the largest investment most will ever consider. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

Practically all the parties involved are very familiar. The real estate agent is the most known person in the transaction. Then, the bank provides the financial capital needed to fund the transaction. And the title company makes sure that all aspects of the sale are completed and that a clear title transfers from the seller to the buyer.

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 value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from All Market Appraisals LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

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

Replacement Cost

This is where we pull information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.

  • If, for example, the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • 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.

Once all necessary adjustments have been made, 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 associating a value with features of homes in Meridian and Ada, All Market Appraisals LLC is your local authority. The sales comparison approach to value is usually given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific situations 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. At the end of the day, an appraiser from All Market Appraisals LLC will help you get the most accurate property value, so you can make wise real estate decisions.