What Goes Into an Appraisal?

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

Practically all the people involved are very familiar. The real estate agent is the most known entity in the transaction. Next, the mortgage company provides the financial capital necessary to bankroll the exchange. And ensuring all aspects of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, what party makes sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. 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 McNiel Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at McNiel Appraisals is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the property, the inspection often includes 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 property.

Following the inspection, an appraiser uses two or three approaches to 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, the appraiser uses information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Leakey and Real, McNiel Appraisals can't be beat. This approach to value is most often awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate generates is factored in with income produced by neighboring properties to derive the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, 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. The bottom line is, an appraiser from McNiel Appraisals will help you get the most accurate property value, so you can make the most informed real estate decisions.