Real Property Appraisals: A Primer

One's home purchase is the largest transaction some people might ever make. It doesn't matter if it's a primary residence, a second vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.

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 real estate agent is the most recognizable face in the transaction. Then, the lender provides the financial capital needed to finance the exchange. Ensuring all details of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

So who's responsible for making sure the value of the property is in line with the amount being paid?   In comes the appraiser.   We provide an unbiased estimate of what a buyer could 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 Serviced Appraisals 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 duty to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property is accurate and document the layout of the property, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser employs two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we gather information on local construction costs, labor rates and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they appraise. We innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable property has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • 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.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. This approach to value is usually given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the real estate yields is factored in with income produced by comparable properties to determine the current value.

Coming Up With the Final Value

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. Depending on the individual 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. 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 get back in the event they had to put the property on the market again. It all comes down to this: An appraiser from Serviced Appraisals will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.