What Are the Components of an Appraisal?

Their home's purchase is the most significant transaction some of us might ever make. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the transaction. Next, the bank provides the financial capital necessary to finance the exchange. The title company makes sure that all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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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 Hillman Appraisal, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Hillman Appraisal, LLC is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser uses 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

Here, we analyze information on local construction costs, the cost of labor and other elements to determine how much it would cost to build a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable property 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.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an 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. When it comes to knowing the true value of features of homes in Mount Pleasant and Charleston, Hillman Appraisal, LLC can't be beat. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. It'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 often employed 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. Here's what it all boils down to, an appraiser from Hillman Appraisal, LLC will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.