What Are the Components of an Appraisal?

Their home's purchase can be the most serious transaction many people might ever encounter. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Most of the parties participating are very familiar. The real estate agent is the most recognizable entity in the exchange. Next, the lender provides the financial capital required to bankroll the transaction. And ensuring all areas of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.

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So, who's responsible for making sure the real estate is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Cashman Appraisal, Inc will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser uses information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
  • But, 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 valid estimate of what the subject could 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 New Orleans and Orleans, Cashman Appraisal, Inc can't be beat. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 they could get back in case they had to sell the property again. It all comes down to this, an appraiser from Cashman Appraisal, Inc will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.