What are the components of an appraisal?

One's home purchase can be the most important investment some could ever make. Whether it's a primary residence, a seasonal vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.


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You're probably familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to finance the deal. The title company ensures all details of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.

So what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Mississippi licensed appraiser from Hunt Appraisal Service will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

If, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Hunt Appraisal Service, we are experts when it comes to knowing the worth of particular items in Natchez and Adams County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific 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. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to: An appraiser from Hunt Appraisal Service will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.