What Are the Components of an Appraisal?

Their home's purchase can be the most significant investment many might ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties taking part in the transaction. The most recognizable face in the transaction is the real estate agent. Then, the bank provides the financial capital required to fund the exchange. And ensuring all requirements of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company.

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So, who's responsible for making sure the property is worth the amount being paid? In comes 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 ASAP Appraisal Group will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our responsibility to first complete 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 indeed are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we use information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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 property.

For example, if the comparable has a fireplace and the subject does not, the appraiser may deduct 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 an 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 valuing features of homes in Lakeland and Polk, ASAP Appraisal Group is second to none. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. 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

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. 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 often employed 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 ASAP Appraisal Group will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.