What Is an Appraisal?

A home purchase is the most serious transaction many people might ever encounter. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

Most of the people involved are quite familiar. The real estate agent is the most familiar face in the exchange. Then, the lender provides the financial capital required to bankroll the transaction. And the title company sees to it that all aspects of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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

So, who's responsible for making sure the value of the real estate is consistent with the purchase price? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from NE AL Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our duty to first conduct 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 shape a reasonable person would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser pulls information on local construction costs, the cost of labor and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • Say, 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 home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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 NE AL Appraisals , we are an authority in knowing the value of real estate features in Scottsboro and Jackson County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not always 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 circumstances 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from NE AL Appraisals will help you get the most fair and balanced property value, so you can make wise real estate decisions.