What goes into an appraisal?

Purchasing a house is the most significant investment some people might ever encounter. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to see it through.


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It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Next, the bank provides the money needed to fund the transaction. Ensuring all aspects of the exchange are completed and that a clear title passes from the seller to the buyer is the title company.

So what party is responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Louisiana licensed appraiser from WALLACE APPRAISAL COMPANY, L.L.C. will ensure you as an interested party are informed.

Inspecting the subject property

To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

After the inspection, we use two or three approaches when determining the value of real 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 construction costs, the cost of labor and other factors to derive 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 predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they work. We innately understand the value of certain features to the residents 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 remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

Say, 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.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

When it comes to putting a value on features of homes in Baton Rouge and East Baton Rouge, WALLACE APPRAISAL COMPANY, L.L.C. is second to none. This approach to value is typically awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the property yields is factored in with income produced by neighboring properties to give an indicator of the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. Here's what it all boils down to: An appraiser from WALLACE APPRAISAL COMPANY, L.L.C. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.