What Are the Components of an Appraisal?

Acquiring real estate is the largest transaction some people might ever make. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to bankroll the deal. And the title company ensures that all aspects of the sale are completed and that a clear title transfers from the seller to the buyer.

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So, who's responsible for making sure the property is worth the purchase price? This is where you meet 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 Send-It Appriasals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must physically 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 condition a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. 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 real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser analyzes information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the communities in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • 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.

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 associating a value with features of homes in Mesilla Park and Dona Ana, Send-It Appriasals can't be beat. This approach to value is typically given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing real estate. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. 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.Regardless, the appraised value is typically 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 Send-It Appriasals will help you get the most accurate property value, so you can make profitable real estate decisions.