What Goes Into an Appraisal?

Their home's purchase can be the most important financial decision most people will ever consider. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the financial capital needed to finance the exchange. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, who makes sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 Online Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Online Appraisals is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

After the inspection, we use 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

This is where the appraiser gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Online Appraisals, we are an authority in knowing the worth of real estate features in Mooresville and Morgan County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a real estate sale.

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 house. 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 give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically 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 sell the property again. It all comes down to this, an appraiser from Online Appraisals will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.