What Are the Parts of an Appraisal?

A home purchase can be the largest transaction most of us could ever make. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.

The majority of the participants are very familiar. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the exchange. And ensuring all areas of the transaction are completed and that a clear title passes to the buyer from the seller is the title company.

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So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 Paul Beasley will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Paul Beasley is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Next, after the inspection, 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.

Cost Approach

This is where we analyze information on local building costs, the cost of labor and other factors to figure out how much it would cost to build a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the communities in which they appraise. 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 home in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

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

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 knowing the true value of features of homes in Derry and Rockingham, Paul Beasley is second to none. This approach to value is usually awarded the most consideration 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 approach to value. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. Depending on the individual situations 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.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 get back in the event they had to sell the property again. It all comes down to this, an appraiser from Paul Beasley will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.