What Are the Components of an Appraisal?

Their home's purchase is the most significant transaction some of us could ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

Most of the people involved are very familiar. The most known entity in the transaction is the real estate agent. Then, the lender provides the financial capital needed to finance the deal. The title company makes sure that all areas of the sale are completed and that a clear title transfers to the buyer from the seller.

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 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 HCK Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at HCK Appraisals is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

After the inspection, an appraiser uses 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.

Cost Approach

This is where we use information on local construction costs, labor rates and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This value 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 get to know the communities in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • If, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace 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.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Lake Tapps and Pierce, HCK Appraisals is second to none. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the property generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. Prices can always 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 the property is actually worth. Here's what it all boils down to, an appraiser from HCK Appraisals will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.