What are the components of an appraisal?

Acquiring real estate is the biggest financial decision most of us may ever consider. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a complex 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.


It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the lender provides the financial capital needed to fund the deal. Ensuring all aspects of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

So what party makes sure the value of the property is in line with the amount being paid?   This is where you meet the appraiser.   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 Missouri licensed appraiser from Baybrooke Appraisal will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect 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.

Replacement Cost

This is where we use information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. We innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate 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 more accurately match the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.
A true estimate 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 given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

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

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the best indication of what a property would sell for in an open market, it may not be the final sales price. Depending on the specific situations 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. The bottom line is: An appraiser from Baybrooke Appraisal will help you get the most accurate property value, so you can make wise real estate decisions.