What Are the Parts of an Appraisal?

Their home's purchase can be the most important investment some will ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Practically all the people involved are quite familiar. The real estate agent is the most familiar entity in the transaction. Next, the lender provides the financial capital needed to finance the transaction. And ensuring all aspects of the exchange are completed and that a clear title passes from the seller to the buyer is the title company.

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So, what party makes sure the property is worth the amount being paid? In comes 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 Advantage One Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we gather information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional 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.

  • If, for example, the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • 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 Advantage One Appraisals, we are experts when it comes to knowing the worth of real estate features in MOUNDS and Creek County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing 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 they could recover in the event they had to sell the property again. At the end of the day, an appraiser from Advantage One Appraisals will guarantee you discover the most accurate property value, so you can make wise real estate decisions.