What Are the Parts of an Appraisal?

Acquiring real estate is the biggest transaction most will ever make. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the transaction. Then, the lender provides the money necessary to finance the exchange. And the title company ensures that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.

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So, who makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Knight Appraisals LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Knight Appraisals LLC 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, living areas, etc, to ensure they indeed are there and are in the shape a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Following the inspection, 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

This is where we use information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • 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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Mooresville and Morgan, Knight Appraisals LLC is second to none. This approach to value is usually given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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.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 case they had to put the property on the market again. The bottom line is, an appraiser from Knight Appraisals LLC will help you attain the most accurate property value, so you can make wise real estate decisions.