What Are the Parts of an Appraisal?

Getting real estate can be the most serious transaction some people might ever consider. Whether it's a primary residence, an additional vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most of the parties involved are quite familiar. The most recognizable face in the exchange is the real estate agent. Then, the lender provides the financial capital needed to fund the transaction. And the title company sees to it that all areas of the transaction are completed and that a clear title passes from the seller to the purchaser.

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So, what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 72 Hour Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where we use 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 value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.

  • Say, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • 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 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 72 Hour Appraisals, we are experts in knowing the value of real estate features in Sacramento and Sacramento County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the property generates is taken into consideration along with income produced by comparable properties to derive the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not always 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 the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, 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 72 Hour Appraisals will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.