Breaking Down the the Appraisal Process

A home purchase is the most significant investment some people might ever encounter. Whether it's a primary residence, an additional vacation property or an investment, purchasing real property is an involved transaction that requires multiple parties to see it through.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.


Practically all the participants are quite familiar. The most familiar person in the exchange is the real estate agent. Then, the bank provides the money necessary to bankroll the transaction. The title company makes sure that all areas of the exchange are completed and that the title is clear to pass from the seller to the buyer.

So who's responsible for making sure the real estate is consistent 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 Mississippi licensed appraiser from Camille McDonald & Associates will ensure you as an interested party are informed.

Appraisals start with the inspection

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

After the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where we use information on local construction costs, the cost of labor and other factors to calculate how much it would cost to build a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. 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.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace 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.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a property would sell for in an open market, it probably will not be the final sales price. Prices can always 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 they could get back in case they had to sell the property again. Here's what it all boils down to: An appraiser from Camille McDonald & Associates will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.