What are the parts of an appraisal?

A home purchase can be the largest investment most could ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.


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Most of the participants are very familiar. The most familiar entity in the transaction is the real estate agent. Then, the mortgage company provides the money required to bankroll the exchange. Ensuring all requirements of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

So who makes sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. 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 Indiana licensed appraiser from Cardinal Appraisal Services will ensure you as an interested party are informed.

Appraisals begin with the property inspection

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, 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 we analyze information on local building costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they appraise. We thoroughly understand the value of particular 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 real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may deduct 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 an amount 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 usually given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a property. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. 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 could sell for in an open market. 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 often used 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. At the end of the day: An appraiser from Cardinal Appraisal Services will help you get the most accurate property value, so you can make profitable real estate decisions.