Understanding Appraisals

Purchasing a house can be the most important investment some might ever encounter. It doesn't matter if a main residence, a second vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to see it through.

Practically all the participants are quite familiar. The most familiar face in the exchange is the real estate agent. Next, the mortgage company provides the money needed to finance the transaction. And ensuring all details of the transaction are completed and that a clear title transfers from the seller to the buyer 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 real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Doucette Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

After the inspection, an appraiser uses 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

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

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. 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 at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

Say, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
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 Doucette Appraisals, we are experts when it comes to knowing the value of particular items in MYRTLE BEACH and Horry County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of revenue the real estate yields is taken into consideration along with income produced by neighboring properties to derive the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically 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. The bottom line is, an appraiser from Doucette Appraisals will help you get the most accurate property value, so you can make wise real estate decisions.

Got a Question?

Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.