What Are the Components of an Appraisal?

Purchasing real estate is the largest transaction many people might ever encounter. Whether it's a main residence, an additional vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.

Most of the people involved are very familiar. The most known person in the transaction is the real estate agent. Then, the lender provides the money required to finance the transaction. And ensuring all requirements of the sale are completed and that a clear title passes from the seller to the purchaser 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 makes sure the property is worth the amount being paid? In comes 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 Henderson Appraisal Service will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Henderson Appraisal Service 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 really are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we gather information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the communities 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 close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

  • Say, for example, the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • 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 High Point and Guilford, Henderson Appraisal Service can't be beat. This approach to value is typically awarded the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to stipulate 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 valueDepending 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 sell the property again. At the end of the day, an appraiser from Henderson Appraisal Service will help you attain the most accurate property value, so you can make the most informed real estate decisions.