What goes into an appraisal?

A home purchase can be the most serious investment most people could ever consider. It doesn't matter if it's a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.


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The majority of the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Then, the lender provides the money required to bankroll the transaction. The title company ensures that all details of the sale are completed and that a clear title transfers from the seller to the buyer.

So who makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Tatham Appraisal Services, Inc. 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 responsibility to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

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

Replacement Cost

Here, we gather information on local building costs, the cost of labor and other elements to ascertain how much it would cost to build a property similar to the one being appraised. This estimate usually 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 communities in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

Say, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject might 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 importance when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With the Final Value

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of 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 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 the property would likely sell for in an open marketplace. It all comes down to this: An appraiser from Tatham Appraisal Services, Inc. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.