What Are the Components of an Appraisal?

Their home's purchase is the biggest investment many people will ever make. Whether it's a primary residence, a seasonal vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.

Practically all the parties involved are very familiar. The most recognizable face in the transaction is the real estate agent. Next, the lender provides the money necessary to bankroll the deal. The title company sees to it that all requirements of the exchange are completed and that the title is clear to pass from the seller to the purchaser.

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So, what party is 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 might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Stonebridge Capital will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Stonebridge Capital is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a typical 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, we identify any obvious amenities - or defects - that would affect the value of the property.

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

Replacement Cost

Here, we gather information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if 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.
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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Jefferson Hills and Allegheny, Stonebridge Capital can't be beat. This approach to value is usually awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing real estate. In this scenario, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a property is worth, it probably will not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Stonebridge Capital will help you get the most accurate property value, so you can make wise real estate decisions.