What Are the Components of an Appraisal?

Acquiring a house is the biggest transaction many people may ever encounter. It doesn't matter if a primary 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 see it through.

You're probably familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the money needed to fund the exchange. The title company makes sure that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.

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 real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Clark Appraisal Services, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Clark Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

After the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser pulls information on local building costs, labor rates and other elements to determine 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. It's also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.

  • Say, for example, the comparable property 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.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Clark Appraisal Services, Inc., we are an authority when it comes to knowing the value of real estate features in Ponte Vedra Beach and Saint Johns County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Clark Appraisal Services, Inc. will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.