What Are the Parts of an Appraisal?

A home purchase is the biggest investment most people will ever consider. Whether it's a main residence, a second vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to fund the deal. And ensuring all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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 property is consistent with the amount being paid? This is where you meet 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 Appraisal Studio will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first task at Appraisal Studio is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often includes 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 property.

Back at the office, 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

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

Say, 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 home.
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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Appraisal Studio, we are experts when it comes to knowing the value of real estate features in Tallahassee and Leon County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with income produced by similar properties to derive the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the strongest indication of what a property is worth, it may not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Appraisal Studio will help you discover the most accurate property value, so you can make the most informed real estate decisions.