What are the components of an appraisal?

A home purchase can be the most significant financial decision many might ever encounter. It doesn't matter if it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.


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Most of the participants are quite familiar. The most familiar person in the transaction is the real estate agent. Then, the bank provides the money required to fund the exchange. Ensuring all aspects of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.

So what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional New York licensed appraiser from Seaway Appraisals will ensure you as an interested party are informed.

The inspection is where an appraisal starts

Our first task at Seaway Appraisals is to inspect the property to ascertain its true status. We must physically see features, 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 typical 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 identifies any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we analyze information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This value 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 neighborhoods in which they appraise. We innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of 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.

For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
However, 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.

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. The sales comparison approach to value is usually given the most consideration 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 - we may use a third approach to value. In this case, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. 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. 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 get back in case they had to put the property on the market again. Here's what it all boils down to: An appraiser from Seaway Appraisals will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.