What Are the Components of an Appraisal?

Their home's purchase is the biggest investment some of us may ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.

You're likely to be familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Next, the bank provides the financial capital necessary to bankroll the exchange. The title company makes sure that all aspects 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 property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 Macoe Davis Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features first hand, 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 proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses 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 analyzes information on local building costs, the cost of labor and other factors to derive how much it would cost to build a property comparable to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct 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.

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. When it comes to knowing the true value of features of homes in Jonesboro and Craighead, Macoe Davis Appraisals is your local authority. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this situation, the amount of revenue the property generates is factored in with income produced by nearby properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable 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 this amount is probably the strongest indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. Here's what it all boils down to, an appraiser from Macoe Davis Appraisals will help you discover the most accurate property value, so you can make profitable real estate decisions.