What Goes Into an Appraisal?

Getting a house is the largest investment many of us may ever encounter. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties having a role in the transaction. The most known person in the transaction is the real estate agent. Then, the bank provides the money needed to bankroll the transaction. The title company sees to it that all details of the sale are completed and that a clear title passes from the seller to the purchaser.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where you meet 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 Alan Partch will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Alan Partch is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable 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, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we gather information on local construction costs, labor rates and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, 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.
  • If the subject property 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Alan Partch, we are experts in knowing the value of real estate features in Sunset Beach and Orange County neighborhoods. The sales comparison approach to value is usually awarded the most consideration 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 measurable number of rental properties. In this case, the amount of income the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific circumstances 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 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 put the property on the market again. At the end of the day, an appraiser from Alan Partch will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.