What Are the Parts of an Appraisal?

Acquiring a home is the most important financial decision some could ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.

It's likely you are familiar with the parties having a role in the transaction. The most familiar entity in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the deal. The title company sees to it that all areas of the transaction are completed and that a clear title transfers from the seller to the purchaser.

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So, who's responsible for making sure the real estate is worth 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 Melissa Calloway, SRA will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at Melissa Calloway, SRA is to inspect the property to ascertain its true status. 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 reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, 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 elements to figure out how much it would cost to build a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match the features of subject property.

  • Say, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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 Melissa Calloway, SRA, we are experts when it comes to knowing the value of particular items in Florence and Lauderdale County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this scenario, the amount of income the property yields is factored in with income produced by nearby properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. At the end of the day, an appraiser from Melissa Calloway, SRA will help you get the most fair and balanced property value, so you can make profitable real estate decisions.