What Are the Parts of an Appraisal?

Their home's purchase can be the most important investment most of us might ever make. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

Most of the participants are quite familiar. The most known face in the exchange is the real estate agent. Next, the lender provides the financial capital needed to bankroll the transaction. The title company sees to it that all details of the sale are completed and that a clear title transfers to the buyer from the seller.

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

So, who makes sure the value of the property is consistent with the amount being paid? This is where you meet 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 Milwaukee Appraisal Co./Stowe Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Milwaukee Appraisal Co./Stowe Appraisals is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there 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 correct and conveying the layout of the property. Most importantly, the appraiser looks for 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 to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we pull information on local building costs, the cost of labor and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of 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 property.

  • If, for example, the comparable 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 has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Milwaukee Appraisal Co./Stowe Appraisals, we are an authority in knowing the value of real estate features in Franklin and Milwaukee County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the property produces is factored in with income produced by neighboring properties to derive the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. 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.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 Milwaukee Appraisal Co./Stowe Appraisals will help you get the most accurate property value, so you can make profitable real estate decisions.