What Are the Parts of an Appraisal?

A home purchase can be the biggest investment most people might ever encounter. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

Practically all the parties involved are quite familiar. The real estate agent is the most familiar entity in the transaction. Then, the mortgage company provides the financial capital needed to finance the transaction. And ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.

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So, who's responsible for making sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. 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 Performance Appraisals Inc. 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 perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - 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.

Cost Approach

Here, we use information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the communities in which they appraise. They thoroughly understand the value of certain 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 property being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace 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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Performance Appraisals Inc., we are experts in knowing the worth of real estate features in Ponte Vedra Beach and Saint Johns County neighborhoods. This approach to value is typically awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to state 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 property is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Performance Appraisals Inc. will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.