What are the components of an appraisal?

One's home purchase can be the largest financial decision some of us will ever make. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is a detailed transaction that requires multiple parties 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.


The majority of the participants are very familiar. The real estate agent is the most familiar entity in the exchange. Then, the lender provides the financial capital needed to bankroll the transaction. Ensuring all areas of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

So what party makes sure the property is consistent 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 property, where both buyer and seller are informed parties. A professional Ohio licensed appraiser from Miller Appraisals will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our duty 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 really exist and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify 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 the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. We thoroughly understand the value of particular 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. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • However, 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.
Once all necessary adjustments have been made, 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 typically awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while this amount is probably the most reliable indication of what a house would sell for in an open market, it may not be the final sales price. 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 the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Miller Appraisals will help you discover the most fair and balanced property value, so you can make wise real estate decisions.