What Are the Parts of an Appraisal?

Acquiring a home can be the most important transaction most people will ever make. Whether it's a main residence, an additional vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Most of the people involved are quite familiar. The real estate agent is the most known face in the transaction. Next, the mortgage company provides the financial capital necessary to bankroll the exchange. The title company sees to it that all details of the sale are completed and that a clear title transfers from the seller to the purchaser.

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 in line with the amount being paid? In comes the appraiser. 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 Cestalia Realty will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical person would expect them to be. To ensure the stated size of the property is accurate and document 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 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: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood 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, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in McHenry and Lake, Cestalia Realty can't be beat. The sales comparison approach to value is most often given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by nearby properties to give an indicator of the current value.

The Bottom Line

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a house 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 an offer or listing price up or down. But the appraised value is often used 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 Cestalia Realty will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.