What Are the Components of an Appraisal?

Their home's purchase can be the most important transaction many of us will ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.

The majority of the people participating are very familiar. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the financial capital necessary to fund the exchange. The title company sees to it that all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, what party makes sure the value of the property is in line with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Balkcom Appraisal Services, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we use information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject 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, additional 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.

  • If, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Balkcom Appraisal Services, LLC, we are an authority in knowing the value of real estate features in Holt and Okaloosa County neighborhoods. The sales comparison approach to value is typically 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 - the appraiser may use a third approach to value. In this case, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. Depending on the individual 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.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. Here's what it all boils down to, an appraiser from Balkcom Appraisal Services, LLC will guarantee you discover the most accurate property value, so you can make wise real estate decisions.