What Are the Parts of an Appraisal?

Their home's purchase can be the most significant financial decision some of us might ever encounter. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

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

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So, who makes sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Daniel Todd Appraisal Services, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Back at the office, 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

This is where we analyze information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the neighborhoods in which they work. They innately 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 in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Bloomington and Monroe, Daniel Todd Appraisal Services, LLC can't be beat. This approach to value is typically given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this scenario, the amount of revenue the property generates is taken into consideration along with income produced by nearby properties to determine the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. At the end of the day, an appraiser from Daniel Todd Appraisal Services, LLC will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.