What Are the Components of an Appraisal?

Their home's purchase is the most significant transaction most may ever make. It doesn't matter if where you raise your family, a second vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

Practically all the parties involved are very familiar. The most known entity in the exchange is the real estate agent. Then, the bank provides the money required to finance the transaction. And ensuring all details of the exchange are completed and that a clear title transfers from the seller to the purchaser is the title company.

So, who makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. 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 Blaine County Appraisal will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first responsibility at Blaine County Appraisal 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 really are present 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 illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we gather information on local building costs, the cost of labor and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.

For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
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 Blaine County Appraisal, we continuously update our research of the value of particular items various neighborhoods in Blaine County and our coverage area in Custer County. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - light industrial properties for example - we may use a third method of valuing a property. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the final sales price. Depending on the specific circumstances 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.But the appraised value is often 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 sell the property again. It all comes down to this, an appraiser from Blaine County Appraisal will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.