What Are the Components of an Appraisal?

Their home's purchase can be the most serious financial decision most will ever make. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties having a role in the transaction. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to fund the transaction. And the title company ensures that all details of the exchange are completed and that the title is clear to pass 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, what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Kizer Appraisal 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 condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

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

Cost Approach

Here, we gather information on local construction costs, labor rates and other factors to determine how much it would cost to build a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

Say, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
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.

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. At Kizer Appraisal, we are experts in knowing the worth of real estate features in Kingman and Mohave County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate generates is factored in with income produced by neighboring properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. 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 the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Kizer Appraisal will help you attain the most fair and balanced property value, so you can make wise real estate decisions.