What Are the Components of an Appraisal?

A home purchase is the largest transaction many could ever make. It doesn't matter if where you raise your family, a second vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The most familiar entity in the exchange is the real estate agent. Then, the lender provides the money needed to bankroll the transaction. And the title company makes sure that all areas of the sale are completed and that the title is clear to pass from the seller to the purchaser.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Revis & Associates will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first duty at Revis & Associates is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local building costs, labor rates and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the communities in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • Say, 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.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Revis & Associates, we are an authority in knowing the worth of particular items in Fort Mill and York County neighborhoods. This approach to value is typically given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this situation, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. 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. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final 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 they could recover in the event they had to put the property on the market again. The bottom line is, an appraiser from Revis & Associates will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.