What Are the Components of an Appraisal?

Their home's purchase can be the biggest investment many of us will ever encounter. It doesn't matter if where you raise your family, an additional vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most of the participants are quite familiar. The real estate agent is the most known face in the exchange. Next, the lender provides the money necessary to finance the exchange. The title company makes sure that all details of the exchange are completed and that the title is clear to pass to the buyer from the seller.

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? In comes the appraiser. 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 David LaFour will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at David LaFour is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really 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 property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - 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 the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we use information on local building costs, the cost of labor and other factors to figure out how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the neighborhoods 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 the neighborhood and finds properties which are 'comparable' to the home at hand. 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 property.

For example, if the comparable property has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
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 true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Charleston and Charleston, David LaFour can't be beat. The sales comparison approach to value is commonly given 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 - the appraiser may use an additional method of valuing a property. In this situation, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it probably will 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from David LaFour will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.