What Goes Into an Appraisal?

A home purchase can be the biggest transaction many will ever encounter. Whether it is where you raise your family, a vacation home or an investment. Purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.

The majority of the participants are very familiar. The real estate agent is the most recognizable entity in the transaction. Then, the lender provides the financial capital required to finance the deal. And ensuring all requirements of the sale are completed and that a clear title passes from the seller to the buyer is the title company. The following paragraphs describe what goes into an appraisal: inspection, data gathering with analysis and finally the conclusion of estimated market value.

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 value of the property is in line with the amount being paid? This is where you meet 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 DC Appraisal will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at DC Appraisal is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: sales comparison, cost and income approach for rental properties.

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Sales Approach

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject 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 more accurately match the features of subject.

  • Say, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, 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.

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. When it comes to knowing the true worth of features of homes in Florence and Darlington counties, DC Appraisal can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate purchase.

Income Approach

A third way of valuing a property is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.



Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, David will make sure you attain the most accurate property value, so you can make wise real estate decisions.