What Goes Into an Appraisal?

A home purchase is the biggest transaction some of us might ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital needed to bankroll the transaction. The title company ensures that all details of the exchange are completed and that the title is clear to pass to the buyer from the seller.

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So, who's responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Metric Appraisals, LLC 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 complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate 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.

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.

Replacement Cost

This is where we gather information on local construction costs, the cost of labor and other elements to derive 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 predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.

For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Metric Appraisals, LLC, we are experts when it comes to knowing the worth of real estate features in Centerville and Davis County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While this amount is probably the best indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 the event they had to put the property on the market again. It all comes down to this, an appraiser from Metric Appraisals, LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.