What Goes Into an Appraisal?

Their home's purchase is the biggest financial decision many people might ever encounter. It doesn't matter if a main residence, a seasonal vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Then, the mortgage company provides the money required to finance the exchange. And the title company makes sure that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

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So, what party makes 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Appraisal Group of SC (803) 530-9901 will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first duty at Appraisal Group of SC (803) 530-9901 is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Back at the office, we use 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

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This value 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 are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • 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.

An opinion 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 associating a value with features of homes in Lexington and Lexington, Appraisal Group of SC (803) 530-9901 can't be beat. This approach to value is commonly given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But 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. The bottom line is, an appraiser from Appraisal Group of SC (803) 530-9901 will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.