What Are the Parts of an Appraisal?

A home purchase can be the most serious financial decision most of us could ever consider. It doesn't matter if a main residence, a second vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

The majority of the participants are very familiar. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the money required to fund the exchange. And the title company ensures that all areas of the sale 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, who makes sure the value of the real estate 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 JDC Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at JDC Appraisal Services 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 truly exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct 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: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we analyze information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. 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 portray the features of subject.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At JDC Appraisal Services, we are experts when it comes to knowing the worth of real estate features in Parma and Cuyahoga County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. 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. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. At the end of the day, an appraiser from JDC Appraisal Services will help you discover the most fair and balanced property value, so you can make wise real estate decisions.