What Are the Parts of an Appraisal?

Purchasing a home is the biggest investment some will ever consider. It doesn't matter if a main residence, a seasonal vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money required to finance the transaction. And ensuring all details of the transaction are completed and that a clear title passes 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 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 Cornerstone Valuation Services Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Cornerstone Valuation Services Inc. is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we use information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know 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 remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match the features of subject property.

  • Say, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • 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 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 value of features of homes in Batesville and Ripley, Cornerstone Valuation Services Inc. can't be beat. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. 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 used 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 Cornerstone Valuation Services Inc. will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.