What Are the Parts of an Appraisal?

Acquiring a home is the largest transaction some of us might ever make. Whether it's a primary residence, a second vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.

The majority of the participants are quite familiar. The most known person in the exchange is the real estate agent. Then, the lender provides the money necessary to bankroll the transaction. And the title company sees to it that all areas of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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So, what party is responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might 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 Taylor & Associates Appraisers, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there 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 looks 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: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser gathers information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property in question. Using knowledge of the value of 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 more accurately portray the features of subject.

  • Say, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • But, 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Taylor & Associates Appraisers, Inc., we are an authority when it comes to knowing the worth of particular items in Greensboro and Guilford County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with income produced by comparable properties to determine the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document 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 valueIt's not uncommon for prices to 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Taylor & Associates Appraisers, Inc. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.