What Are the Components of an Appraisal?

Their home's purchase can be the most important transaction most might ever encounter. Whether it's a primary residence, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.

Most of the people involved are quite familiar. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the financial capital necessary to finance the exchange. And the title company sees to it 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 real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Chalk & Gibbs, Inc will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at Chalk & Gibbs, Inc is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly 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 accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use 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.

Replacement Cost

This is where the appraiser gathers information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually 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 communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales 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 upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Chalk & Gibbs, Inc, we are an authority when it comes to knowing the worth of real estate features in Morehead City and Carteret County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this scenario, the amount of revenue the property produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically 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 put the property on the market again. It all comes down to this, an appraiser from Chalk & Gibbs, Inc will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.