What Goes Into an Appraisal?

Purchasing real estate is the most significant financial decision some could ever encounter. It doesn't matter if a primary residence, a seasonal vacation home or an investment, purchasing real property is an involved transaction that requires multiple parties to see it through.

Most of the participants are quite familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the money required to finance the transaction. And ensuring all details of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

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 is responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Harris Young Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Harris Young Appraisals is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we analyze information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • 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.
  • But, 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 valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Harris Young Appraisals, we are experts in knowing the worth of real estate features in Florence and Boone County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, 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.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price 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'. But 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. At the end of the day, an appraiser from Harris Young Appraisals will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.