What Are the Components of an Appraisal?

Getting a house is the most serious investment most people could ever encounter. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

Practically all the participants are quite familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the transaction. And ensuring all requirements of the sale are completed and that a clear title passes from the seller to the buyer 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 is responsible for making sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Kasza's Appraisal Service, LLC will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first duty at Kasza's Appraisal Service, LLC 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, amenities, etc., to ensure they truly are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Back at the office, 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.

Replacement Cost

Here, the appraiser pulls information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • 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.

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 putting a value on features of homes in Temperance and Monroe, Kasza's Appraisal Service, LLC is your local authority. The sales comparison approach to value is most often given the most weight when an appraisal is for a home 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 revenue the real estate generates is factored in with income produced by similar properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. It all comes down to this, an appraiser from Kasza's Appraisal Service, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.