What Are the Parts of an Appraisal?

Getting a home is the most important financial decision some of us will ever consider. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

Practically all the people participating are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the lender provides the money necessary to finance the exchange. And ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, what party is responsible for making 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 Austin & Austin Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Austin & Austin Appraisal Services 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 truly are there and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Next, 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.

Cost Approach

Here, we gather information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly 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 property in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.

For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Greeley and Weld, Austin & Austin Appraisal Services can't be beat. This approach to value is typically awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. 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.But 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 Austin & Austin Appraisal Services will guarantee you get the most accurate property value, so you can make wise real estate decisions.