What Are the Components of an Appraisal?

Getting a house can be the most serious financial decision many people will ever encounter. It doesn't matter if a primary residence, a seasonal vacation home or one of many rentals, the purchase of real property is a detailed 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 real estate agent is the most known face in the exchange. Next, the lender provides the money required to fund the exchange. And ensuring all requirements of the sale are completed and that the title is clear to pass 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 makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Carter Valuation Services Inc will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

To determine the true status of the property, it's our responsibility to first perform 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 are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper 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, an appraiser uses 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.

Replacement Cost

Here, we analyze information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value 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 can tell you a lot about the communities in which they work. They innately understand the value of specific features to the residents 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 being appraised. Using knowledge of the value of 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 are more accurately in line with the features of subject property.

  • For example, if 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.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an 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 Carter Valuation Services Inc, we are an authority in knowing the worth of particular items in West Jefferson and Ashe County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, 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 the property is actually worth. Here's what it all boils down to, an appraiser from Carter Valuation Services Inc will help you get the most accurate property value, so you can make wise real estate decisions.