What goes into an appraisal?

Acquiring real estate can be the most important transaction some people may ever encounter. It doesn't matter if it's a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to pull it all off.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

The majority of the participants are very familiar. The real estate agent is the most recognizable person in the transaction. Then, the lender provides the money required to bankroll the transaction. Ensuring all details of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

So who makes sure 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 professional Alabama licensed appraiser from Gibson Appraisals will ensure you as an interested party are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a reasonable person 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, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we pull information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value often sets the upper limit 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. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

For example, if the comparable property has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain 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. The sales comparison approach to value is usually given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. 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 the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Gibson Appraisals will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.