What Are the Parts of an Appraisal?

Getting a home can be the most significant transaction many could ever encounter. It doesn't matter if a primary residence, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Then, the bank provides the financial capital required to fund the exchange. And the title company sees to it that all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, what party makes sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could 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 Southwest Missouri Appraisals, Marcus R. Sammons will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first task at Southwest Missouri Appraisals, Marcus R. Sammons is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present 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 convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property 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.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. Using knowledge of the value of 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 are more accurately in line with the features of subject property.

For example, if 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.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A true estimate of what the subject might 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 Marshfield and Webster, Southwest Missouri Appraisals, Marcus R. Sammons is second to none. This approach to value is usually awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.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. The bottom line is, an appraiser from Southwest Missouri Appraisals, Marcus R. Sammons will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.