What Are the Components of an Appraisal?

Acquiring real estate is the most significant financial decision some could ever consider. Whether it's a primary residence, a second vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.

You're likely to be familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Next, the mortgage company provides the money needed to fund the transaction. And ensuring all details of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the property is in line with the amount being paid? 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 (208) 782-0233 will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at (208) 782-0233 is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser pulls information on local building costs, labor rates and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. 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.

Say, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Blackfoot and Bingham, (208) 782-0233 is second to none. This approach to value is commonly awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the property produces is factored in with income produced by comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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 valueDepending on the specific 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 the property is actually worth. It all comes down to this, an appraiser from (208) 782-0233 will help you discover the most accurate property value, so you can make profitable real estate decisions.