What Are The Components Of An Appraisal?

One's home purchase can be the most important transaction some could ever consider. Whether it's a main residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working together to make it all happen.

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


Most people are familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Then, the mortgage company provides the money needed to fund the exchange. The title company makes sure that all aspects of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

So who makes sure the value of the real estate is in line 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 to receive for a parcel of real estate, where both buyer and seller are informed parties. A certified professional appraiser from Frontline Appraisals, LLC will ensure you as an interested party are informed.

The Inspection Is Where An Appraisal Starts

To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, we look for any obvious amenities or defects that would affect the value of the house. Following the inspection, an appraiser typically employs two or three approaches when determining the value of the property: sales comparison, cost and in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local building costs, labor rates and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the market areas in which they work. We innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable has a basement and the subject doesn't, the appraiser will deduct the realized value of a basement 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 adds the appropriate value realized by the market of that bath to the comparable property.
An opinion of what the subject might sell for can only be developed once all differences between the comparable and the subject have been evaluated. This approach to value is commonly given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third approach to value is sometimes employed when the property being appraised is income producing or a rental property. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to develop the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: 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 final sales price. 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. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan more money than the property would likely sell for in an open marketplace. The bottom line is, an appraiser from Frontline Appraisals, LLC will help you attain the most accurate property value, so you can make the most informed real estate decisions.