What are the parts of an appraisal?

Buying a home can be the biggest investment some of us could ever make. Whether it's a main residence, a seasonal vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.


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Practically all the people involved are very familiar. The most recognizable person in the transaction is the real estate agent. Next, the bank provides the financial capital needed to fund the deal. The title company sees to it that all areas of the transaction are completed and that a clear title transfers from the seller to the purchaser.

So who's responsible for making sure the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Maryland licensed appraiser from Elite Real Estate Appraisals, LLC will ensure you as an interested party are informed.

Appraisals begin with the inspection

Our first task at Elite Real Estate Appraisals, LLC is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, an appraiser employs two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we use information on local construction costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers get to know the communities in which they work. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as square footage, additional 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 a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to associating a value with features of homes in Bel Air and Harford, Elite Real Estate Appraisals, LLC can't be beat. This approach to value is most often awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this case, the amount of income the property produces is factored in with income produced by comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's value It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. At the end of the day: An appraiser from Elite Real Estate Appraisals, LLC will help you get the most accurate property value, so you can make profitable real estate decisions.