What Are the Components of an Appraisal?

Purchasing a home can be the most significant transaction many people may ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is an involved 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 known person in the transaction is the real estate agent. Next, the mortgage company provides the financial capital necessary to finance the exchange. And ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

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

So, what party makes sure the property is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from C. Gaba Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first task at C. Gaba Appraisals, LLC is to inspect the property to determine its true status. 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 there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser uses information on local construction costs, labor rates and other factors to calculate how much it would cost to construct a property comparable to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to 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 more accurately match the features of subject property.

  • 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.
  • But, 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.

Once all necessary adjustments have been made, 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 associating a value with features of homes in Mobile and Mobile, C. Gaba Appraisals, LLC can't be beat. This approach to value is commonly awarded the most weight when an appraisal is for a home exchange.

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 case, the amount of income the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the individual 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from C. Gaba Appraisals, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.