What Are the Parts of an Appraisal?

A home purchase can be the biggest financial decision many people will ever make. It doesn't matter if it is where you raise your family, a second vacation property or one of many rentals. The purchase of real property is an involved transaction that requires multiple parties to see it through.

You're likely to be familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the lender provides the money required to finance the transaction. The title company ensures that all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller.

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So, who makes sure the value of the property is in line with the amount being paid? Enter 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 Caleb Hollis Appraisals Inc. will ensure, you, as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, we use information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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.

  • For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Caleb Hollis Appraisals Inc., we are experts when it comes to knowing the value of particular items in St Johns and Saint Johns County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Analyzing 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 necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending 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.Regardless, 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 Caleb Hollis Appraisals Inc. will guarantee you attain the most accurate property value, so you can make wise real estate decisions.