What are the components of an appraisal?

Getting real estate is the biggest financial decision many people might ever encounter. Whether it's a main residence, an additional vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to see it through.


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Most of the participants are very familiar. The most recognizable person in the transaction is the real estate agent. Next, the lender provides the money needed to fund the exchange. Ensuring all requirements of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

So what party is responsible for making sure the value of the real estate is in line with the amount being paid? 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 professional Alabama licensed appraiser from Druid City Appraisals, LLC will ensure you as an interested party are informed.

Inspecting the subject property

Our first responsibility at Druid City Appraisals, LLC is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser employs two or three approaches when 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 the appraiser uses information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they work. We innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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 deduct the value of an irrigation system from the sales price of the comparable.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

When it comes to putting a value on features of homes in Cottondale and Tuscaloosa, Druid City Appraisals, LLC can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate produces is factored in with income produced by comparable properties to determine 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 in question. Note: While the appraised value is probably the strongest indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Druid City Appraisals, LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.