Decoding the Appraisal Process

Acquiring real estate is the largest investment some might ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

The majority of the participants are very familiar. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the money necessary to bankroll the transaction. And the title company sees to it that all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller.

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So, who's responsible for making sure the real estate is worth the purchase price? In comes 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 licensed, certified, professional appraiser from C. Gaba Appraisals, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, an appraiser uses two or three approaches to 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 we analyze information on local building costs, labor rates and other factors to derive how much it would cost to build a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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 extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At C. Gaba Appraisals, LLC, we are an authority in knowing the value of real estate features in Mobile and Mobile County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with income produced by similar properties to give an indicator of the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing 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 recover in the event they had to sell the property again. At the end of the day, an appraiser from C. Gaba Appraisals, LLC will help you get the most fair and balanced property value, so you can make profitable real estate decisions.