Decoding the Appraisal Process

A home purchase is the largest transaction most may ever consider. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the exchange. Then, the bank provides the financial capital required to finance the deal. And ensuring all details of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.

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 property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from A-1 Appraisals, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at A-1 Appraisals, LLC is to inspect the property to ascertain its true status. 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 truly are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, 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.

Replacement Cost

This is where the appraiser uses information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the property 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 portray the features of subject.

  • If, for example, the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At A-1 Appraisals, LLC, we are an authority in knowing the worth of particular items in Conway and Horry County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property yields is taken into consideration along with income produced by similar properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from A-1 Appraisals, LLC will help you discover the most accurate property value, so you can make profitable real estate decisions.