What Are the Parts of an Appraisal?

A home purchase can be the largest financial decision some of us might ever consider. Whether it's a primary residence, an additional vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

Most of the people involved are quite familiar. The real estate agent is the most familiar face in the transaction. Then, the bank provides the financial capital required to fund the deal. And ensuring all requirements of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

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So, who makes sure the value of the real estate is in line with the amount being paid? This is where you meet 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 Crescent Appraisal Group, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first responsibility at Crescent Appraisal Group, Inc. is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

After the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, we use information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the communities in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

For example, if the comparable 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 home.
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 Crescent Appraisal Group, Inc., we are an authority in knowing the value of real estate features in Metairie and Jefferson County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate yields is factored in with income produced by comparable properties to determine 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. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically 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 Crescent Appraisal Group, Inc. will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.