What Are the Parts of an Appraisal?

Buying real estate is the biggest investment most people will ever encounter. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties having a role in the transaction. The most known face in the exchange is the real estate agent. Next, the mortgage company provides the money needed to finance the deal. And ensuring all aspects of the exchange 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 makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Burke Appraisal Group, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at Burke Appraisal Group, LLC is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed 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 accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

After the inspection, 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

Here, the appraiser uses information on local building costs, the cost of labor and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. 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 are more accurately in line with the features of subject property.

  • For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may deduct 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 a certain amount 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 Bartlett and Shelby, Burke Appraisal Group, LLC is your local authority. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Burke Appraisal Group, LLC will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.