What Are the Components of an Appraisal?

Acquiring a house can be the most important transaction most of us might ever consider. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to see it through.

It's likely you are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the money needed to fund the transaction. And ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, what party makes sure the real estate is worth the amount being paid? In comes 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 Casa Grande Appraisal Service will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at Casa Grande Appraisal Service is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Next, after the inspection, an appraiser uses 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

This is where the appraiser pulls information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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 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 home.
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.

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 associating a value with features of homes in Tempe and Maricopa, Casa Grande Appraisal Service can't be beat. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the property produces is factored in 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 document an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. Prices can always 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. At the end of the day, an appraiser from Casa Grande Appraisal Service will help you get the most accurate property value, so you can make the most informed real estate decisions.