What Are the Parts of an Appraisal?

Purchasing a house is the most serious transaction many of us might ever consider. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Next, the lender provides the financial capital required to finance the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, who's responsible for making sure the property is worth the purchase price? In comes the appraiser. 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 Lemmon Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate 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.

Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser gathers information on local building costs, the cost of labor and other factors to calculate 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. It's also the least used method.

Sales Comparison

Appraisers get to know the communities in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of 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.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • However, 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. At Lemmon Appraisal Services, we are experts when it comes to knowing the worth of particular items in El Paso and El Paso County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method 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 generates is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to document 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 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'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. It all comes down to this, an appraiser from Lemmon Appraisal Services will help you discover the most accurate property value, so you can make the most informed real estate decisions.