What is an appraisal?

One's home purchase can be the most serious financial decision many people could ever consider. It doesn't matter if it's where you raise your family, an additional vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to see it through.


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You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the exchange. Then, the lender provides the money necessary to bankroll the exchange. The title company ensures that all details of the exchange are completed and that a clear title passes to the buyer from the seller.

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 South Dakota licensed appraiser from Wyatt's Real Estate & Appraisal Service will ensure you as an interested party are informed.

Appraisals start with the inspection

Our first responsibility at Wyatt's Real Estate & Appraisal Service is to inspect the property to ascertain its true status. We must actually 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. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we use information on local building costs, labor rates and other factors to figure out how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to 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 more accurately match the features of subject property.

If, for example, the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

When it comes to knowing the true value of features of homes in Hot Springs and Fall River, Wyatt's Real Estate & Appraisal Service is second to none. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home 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 comparable properties to determine the current value.

Putting It All Together

Examining the data from all 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 a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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. At the end of the day: An appraiser from Wyatt's Real Estate & Appraisal Service will help you attain the most fair and balanced property value, so you can make wise real estate decisions.