What Are the Components of an Appraisal?

Purchasing a home can be the biggest investment some could ever make. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Next, the lender provides the financial capital required to finance the transaction. And ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

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So, who's responsible for making sure the value of the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Appraisal Services of SC, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

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.

Cost Approach

This is where the appraiser pulls information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain 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. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

Once all necessary adjustments have been made, 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 associating a value with features of homes in Summerville and Dorchester, Appraisal Services of SC, Inc. can't be beat. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the property generates is taken into consideration along with income produced by comparable properties to derive 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 in question. It is important to note that while this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. 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.Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Appraisal Services of SC, Inc. will help you get the most accurate property value, so you can make the most informed real estate decisions.