What Are the Parts of an Appraisal?

Getting a home is the biggest investment most of us could ever consider. Whether it's a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.

Practically all the parties involved are quite familiar. The most familiar entity in the exchange is the real estate agent. Next, the bank provides the money necessary to fund the exchange. And ensuring all areas of the transaction are completed and that the title is clear to pass from the seller to the purchaser is the title company.

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So, what party is responsible for making 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 might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Alamogordo Appraisal Associates, Inc. will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first duty at Alamogordo Appraisal Associates, Inc. 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, amenities, etc., to ensure they really are there 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 correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, extra 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.

For example, if the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
However, if the subject 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. When it comes to associating a value with features of homes in Alamogordo, Otero County and Otero, Alamogordo Appraisal Associates, Inc. is second to none. This approach to value is commonly given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the specific 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 often 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. At the end of the day, an appraiser from Alamogordo Appraisal Associates, Inc. will help you get the most fair and balanced property value, so you can make profitable real estate decisions.