What Are the Parts of an Appraisal?

Getting a home is the most important financial decision many might ever make. It doesn't matter if a main residence, a second vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.

Practically all the participants are very familiar. The most recognizable entity in the transaction is the real estate agent. Then, the lender provides the money needed to bankroll the exchange. And ensuring all areas of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.

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So, what party is responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. 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 Titan Consulting, LLC 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 responsibility to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Next, after the inspection, we use 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.

Cost Approach

This is where the appraiser gathers information on local construction costs, labor rates and other elements to figure out how much it would cost to build a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the communities in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.

  • If, for example, the comparable property has an irrigation system and the subject does not, the appraiser may subtract 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.

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 Titan Consulting, LLC, we are an authority in knowing the value of particular items in Mesa and Maricopa County neighborhoods. This approach to value is commonly given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this, an appraiser from Titan Consulting, LLC will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.