What Goes Into an Appraisal?

A home purchase can be the largest transaction most people might ever make. It doesn't matter if a primary residence, a seasonal vacation property or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the transaction. Next, the lender provides the financial capital needed to fund the transaction. And ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller 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, what party makes sure the real estate is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Tri County Appraisals will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first task at Tri County Appraisals is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, 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 we gather information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home in question. 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 are more accurately in line with the features of subject.

  • For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter 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.

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 knowing the true worth of features of homes in Goose Creek and Berkeley, Tri County Appraisals can't be beat. The sales comparison approach to value is usually given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all applicable 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 necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the specific situations 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 they could recover in case they had to sell the property again. At the end of the day, an appraiser from Tri County Appraisals will help you get the most accurate property value, so you can make profitable real estate decisions.