What Are the Components of an Appraisal?

Getting real estate is the largest financial decision many of us may ever encounter. It doesn't matter if a main residence, a second vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to see it through.

You're probably familiar with the parties taking part in the transaction. The most familiar face in the transaction is the real estate agent. Then, the lender provides the financial capital required to fund the exchange. And ensuring all details of the sale 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, who makes sure the real estate is worth the amount being paid? 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 Routt County Appraisers will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Routt County Appraisers is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

After the inspection, we use 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 we use information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter 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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Routt County Appraisers, we are an authority in knowing the worth of real estate features in Steamboat Springs and Routt County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the property produces is factored in with income produced by neighboring properties to determine the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a property is worth, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used 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. At the end of the day, an appraiser from Routt County Appraisers will guarantee you discover the most accurate property value, so you can make wise real estate decisions.