What Are the Components of an Appraisal?

Acquiring a home can be the most serious financial decision many of us might ever make. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.

Practically all the parties participating are quite familiar. The most known entity in the transaction is the real estate agent. Then, the lender provides the money necessary to bankroll the deal. And ensuring all details of the exchange are completed and that the title is clear to pass from the seller to the purchaser 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 property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Mancari Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price 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 doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • 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.

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 Mancari Appraisal Services, we are an authority in knowing the worth of real estate features in Newark and New Castle County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a house 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'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Mancari Appraisal Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.