An Overview of Appraisals

Real estate ownership and investment represent some of the most significant financial decisions individuals or organizations can make. Whether it involves a personal residence, an income-producing property, a vacation home, or commercial real estate, each transaction is a complex process that brings together multiple parties to ensure a successful outcome.

Typically, the process includes familiar participants — real estate agents who facilitate negotiations, lenders who provide financing, and title companies who ensure the proper transfer of ownership and clear title.

But who ensures that the value of the real estate aligns with the amount being financed, invested, or insured? That’s where the appraiser comes in.

As licensed, professional appraisers, Dawson Appraisal Services, LLC provides independent and unbiased opinions of value for a wide range of property types and purposes. Our objective analysis ensures that buyers, sellers, investors, attorneys, and lenders alike have the reliable information they need to make sound, informed decisions.

The Inspection

To accurately determine a property’s value, the appraiser must first understand its true characteristics and condition. In many cases, this includes a firsthand visual inspection to verify key details such as the size, layout, and features of the property, as well as to identify any notable amenities or conditions that could influence value. In other assignments, we may rely on verified third-party data, plans, or photographs when a physical inspection is not required or feasible.

Once sufficient information about the property has been gathered, the appraiser applies one or more standard valuation methodologies. These may include the sales comparison approach, which analyzes recent comparable sales; the cost approach, which estimates the expense to reproduce or replace the property; and the income approach, commonly used for income-producing real estate.

By integrating these approaches and applying professional judgment, we develop a credible, well-supported opinion of value suited to the specific purpose of the appraisal.

Cost Approach

Here, we gather information on local building costs, labor rates and other elements to figure out 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. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 match the features of subject.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. This 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 - we may use a third approach to value. In this situation, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to stipulate 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 would sell for in an open market, it probably will not be the price at which the property closes. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. But 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. At the end of the day: An appraiser from Dawson Appraisal Services, LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.