What Are the Components of an Appraisal?

Purchasing a house can be the most significant financial decision many people might ever make. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

The majority of the people involved are quite familiar. The most familiar face in the transaction is the real estate agent. Next, the lender provides the financial capital needed to fund the exchange. And the title company makes sure that all requirements of the transaction are completed and that a clear title passes from the seller to the purchaser.

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So, what party is responsible for making sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. 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 Priority Appraisal Group, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Priority Appraisal Group, LLC is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

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

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

  • Say, for example, the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Priority Appraisal Group, LLC, we are an authority when it comes to knowing the worth of real estate features in Marshfield and Webster County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the specific circumstances 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.Regardless, 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. It all comes down to this, an appraiser from Priority Appraisal Group, LLC will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.