What Are the Parts of an Appraisal?

A home purchase can be the most important transaction most people might ever consider. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.

Most of the participants are very familiar. The most known face in the exchange is the real estate agent. Next, the lender provides the money necessary to bankroll the transaction. And ensuring all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, who makes sure the value of the real estate is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Greg Stone Appraisal Company 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 conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often requires 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.

After the inspection, we use 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.

Replacement Cost

Here, we pull information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to 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 are more accurately in line with the features of subject.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Greg Stone Appraisal Company, we are experts when it comes to knowing the value of particular items in Sumter and Sumter County neighborhoods. This approach to value is commonly awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. 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 the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But 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. At the end of the day, an appraiser from Greg Stone Appraisal Company will guarantee you get the most accurate property value, so you can make profitable real estate decisions.