Decoding the Appraisal Process

A home purchase can be the most serious financial decision many people may ever encounter. It doesn't matter if a main residence, a second vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

You're likely to be familiar with the parties taking part in the transaction. The most recognizable face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to bankroll the exchange. And ensuring all requirements of the exchange are completed and that a clear title passes to the buyer from the seller 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? This is where the appraiser comes in. We provide an unbiased estimate 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 licensed, certified, professional appraiser from C. Gaba Appraisals, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at C. Gaba Appraisals, LLC is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

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

Cost Approach

This is where we pull information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property comparable to the one 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.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • 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 C. Gaba Appraisals, LLC, we are experts when it comes to knowing the value of particular items in Mobile and Mobile County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home sale.

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 case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. 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'. But the appraised value is typically 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 C. Gaba Appraisals, LLC will help you get the most accurate property value, so you can make wise real estate decisions.