What Are the Parts of an Appraisal?

Getting real estate is the most significant transaction many people might ever make. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

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

So, what party makes sure the value of the real estate is consistent with the purchase price? In comes the appraiser. 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 Gil Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at Gil Appraisals is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we use information on local building costs, the cost of labor 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. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. At Gil Appraisals, we are experts in knowing the worth of real estate features in Pearl City and Honolulu County neighborhoods. This approach to value is commonly awarded the most weight 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 - we may use a third approach to value. In this case, the amount of revenue the property yields is taken into consideration along with income produced by nearby properties to determine the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a house is worth, it may not be the final sales price. 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.Regardless, 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 case they had to put the property on the market again. At the end of the day, an appraiser from Gil Appraisals will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.