Real Estate Appraisals: A Primer

Acquiring real estate is the biggest investment some could ever make. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

The majority of the participants are very familiar. The most familiar entity in the transaction is the real estate agent. Then, the lender provides the financial capital needed to bankroll the transaction. And the title company sees to it that all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller.

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

So, what party is responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Gowan Appraisal Service, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Following the inspection, 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.

Replacement Cost

Here, we analyze information on local building costs, labor rates and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the home being appraised. 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.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • However, 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.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Gowan Appraisal Service, Inc., we are experts when it comes to knowing the value of particular items in Spartanburg and Spartanburg County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the strongest indication of what a property is worth, it probably will not be the final sales price. Depending on the individual situations 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Gowan Appraisal Service, Inc. will help you discover the most accurate property value, so you can make profitable real estate decisions.