Real Estate Appraisals: A Primer

A home purchase can be the most significant investment many of us may ever encounter. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most familiar entity in the transaction is the real estate agent. Then, the lender provides the financial capital required to bankroll the exchange. And the title company makes sure that all details of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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

So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Carter Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at Carter Appraisal is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

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

Cost Approach

This is where we use information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate commonly 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 neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents 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 in question. 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 more accurately portray the features of subject.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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. At Carter Appraisal, we are an authority when it comes to knowing the value of real estate features in Cordele and Crisp County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Examining the data 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 always the final sales price even though it is likely the best indication of what a property is worth. Depending on the specific circumstances 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 they could get back in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Carter Appraisal will help you attain the most accurate property value, so you can make wise real estate decisions.