What are the parts of an appraisal?

Getting a home can be the most important transaction most people may ever make. Whether it's a main residence, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.


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

It's likely you are familiar with the parties taking part in the transaction. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the money needed to finance the deal. Ensuring all details of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

So what party is responsible for making sure the real estate is consistent with 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 property, where both buyer and seller are informed parties. A professional Colorado licensed appraiser from Colorado Realty Reports will ensure you as an interested party are informed.

Appraisals begin with the inspection

Our first responsibility at Colorado Realty Reports is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

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

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other factors to figure out how much it would cost to construct a property comparable to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. We thoroughly 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. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
But, 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.

At Colorado Realty Reports, we are experts when it comes to knowing the value of particular items in Del Norte and Rio Grande County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to stipulate 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 a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Colorado Realty Reports will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.