What Are the Parts of an Appraisal?

A home purchase is the biggest transaction most will ever consider. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.

The majority of the participants are very familiar. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to finance the transaction. And ensuring all aspects of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.

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So, who makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might 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. M. Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there 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 amenities - or defects - that would affect the value of the house.

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

Cost Approach

Here, we pull information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.

For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
However, 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.

A true estimate 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. M. Appraisals, we are an authority in knowing the value of real estate features in West Columbia and Lexington County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the property generates is factored in with income produced by neighboring properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, 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. At the end of the day, an appraiser from A. M. Appraisals will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.

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