What Are the Components of an Appraisal?

Their home's purchase can be the most significant financial decision many will ever encounter. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

Most of the participants are very familiar. The most recognizable entity in the exchange is the real estate agent. Next, the mortgage company provides the money required to finance the deal. And the title company makes sure that all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

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So, who makes sure the property is worth the purchase price? 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 Anow will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there 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 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 house.

Following the inspection, an appraiser uses 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.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the communities in which they work. They thoroughly understand the value of particular 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 home at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if 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 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. When it comes to putting a value on features of homes in London and none, Anow can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this situation, the amount of income the property generates is taken into consideration along with income produced by similar properties to determine the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a house is worth, it probably will not be the final sales price. Depending on the individual 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.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 Anow will guarantee you attain the most accurate property value, so you can make wise real estate decisions.