What Goes Into an Appraisal?

Their home's purchase is the most important financial decision most people will ever make. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.

Practically all the parties participating are quite familiar. The real estate agent is the most recognizable entity in the exchange. Then, the bank provides the money necessary to finance the exchange. And ensuring all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, what party makes sure the value of the property is consistent 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Jennifer Galloway Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at Jennifer Galloway Appraisals is to inspect the property to ascertain its true status. We must physically see 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 shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

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

Cost Approach

This is where we pull information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. 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 property.

  • If, for example, the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • 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.

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. At Jennifer Galloway Appraisals, we are an authority when it comes to knowing the value of particular items in Ashland and Boyd County neighborhoods. 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

A third method 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 property generates is taken into consideration along with income produced by similar properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a property is worth, it probably will 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Jennifer Galloway Appraisals will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.