Real Property Appraisals: A Primer

One's home purchase is the biggest transaction many people could ever encounter. It doesn't matter if it's a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

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


The majority of the participants are very familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the deal. Ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.

So who makes sure the property is consistent with the purchase price?   This is where the appraiser comes in.   We provide an unbiased opinion 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 professional Mississippi licensed appraiser from Karen Delk & Associates, Inc will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

After the inspection, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser pulls information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they work. We 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 home being appraised. 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 adjust the comparable properties 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 subtract the value of a fireplace 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.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by nearby properties to derive the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a house would sell for in an open market, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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. The bottom line is: An appraiser from Karen Delk & Associates, Inc will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.