What are the parts of an appraisal?

A home purchase can be the biggest financial decision many people may ever encounter. Whether it's a primary residence, an additional vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert 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.


It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the exchange. Next, the lender provides the money needed to fund the deal. The title company sees to it that all aspects of the exchange are completed and that the title is clear to pass from the seller to the purchaser.

So what party is responsible for making sure the property is consistent with the purchase price?   This is where you meet the appraiser.   We provide an unbiased opinion 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 New York licensed appraiser from DMP Appraisals will ensure you as an interested party are informed.

The inspection is where an appraisal starts

Our first task at DMP Appraisals is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the house, 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.

Back at the office, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser gathers information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of specific features to the people 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 being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace 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.
An opinion 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 usually awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this scenario, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily 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. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property would likely sell for in an open marketplace. The bottom line is: An appraiser from DMP Appraisals will help you get the most accurate property value, so you can make wise real estate decisions.