What Are the Parts of an Appraisal?

Their home's purchase can be the most significant investment most people may ever encounter. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Then, the bank provides the financial capital needed to bankroll the deal. And ensuring all details of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, who makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 The Caldwell Group will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first duty at The Caldwell Group is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical 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, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

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

Replacement Cost

Here, the appraiser analyzes 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 commonly 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 become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

For example, if 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 home.
However, 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.

After all differences have been accounted for, 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 associating a value with features of homes in Brentwood and Williamson, The Caldwell Group can't be beat. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of income the property yields is factored in with income produced by similar properties to give an indicator of the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to state 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 property is worth, it may not be the final sales price. Depending on the individual 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.But 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. Here's what it all boils down to, an appraiser from The Caldwell Group will help you attain the most accurate property value, so you can make the most informed real estate decisions.