What Are the Parts of an Appraisal?

A home purchase can be the most significant financial decision most may ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to fund the exchange. And ensuring all details of the transaction are completed and that the title is clear to pass from the seller to the purchaser is the title company.

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 value of the real estate is in line 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Carter Appraisal Group L.L.C. will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first responsibility at Carter Appraisal Group L.L.C. is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser pulls information on local building costs, the cost of labor and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Carter Appraisal Group L.L.C., we are an authority when it comes to knowing the value of particular items in Queen Creek and Maricopa County neighborhoods. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home sale.

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 property. In this scenario, the amount of revenue the property produces is taken into consideration along with income produced by comparable properties to determine the current value.

The Bottom Line

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Carter Appraisal Group L.L.C. will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.