What Goes Into an Appraisal?

A home purchase is the largest financial decision most people may ever make. Whether it's a main residence, an additional vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the transaction. Then, the bank provides the money necessary to fund the transaction. And ensuring all aspects of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

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So, what party is responsible for making sure the real estate is worth the purchase price? This is where the appraiser comes in. 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 Cadence Way Appraisal Services LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Cadence Way Appraisal Services LLC is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. 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 real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

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

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches 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 square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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 knowing the true worth of features of homes in Merigold and Bolivar, Cadence Way Appraisal Services LLC can't be beat. This approach to value is most often awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of 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 in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. Here's what it all boils down to, an appraiser from Cadence Way Appraisal Services LLC will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.