Understanding Appraisals

Acquiring a home is the most significant transaction many of us could ever make. Whether it's a main residence, an additional vacation home or an investment, purchasing 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 taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the lender provides the money needed to bankroll the deal. The title company ensures that all details of the sale are completed and that a clear title passes to the buyer from the seller.

So who makes sure the property is consistent 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 receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Mississippi licensed appraiser from Evaluating Property in the MidSouth (EPM) will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are there and are in the condition a typical person would expect them to be. To ensure the stated square footage is accurate and illustrate 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 property.

After 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 analyze information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the neighborhoods in which they work. We innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • Say, for example, the comparable 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.
  • But, 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.
A true estimate 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 typically given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With the Final Value

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a house would sell for in an open market, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, 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 Evaluating Property in the MidSouth (EPM) will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.