Real Property Appraisals: A Primer

Purchasing a home is the most serious transaction most of us might ever consider. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.


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The majority of the people participating are very familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital required to finance the deal. Ensuring all aspects of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

So who makes sure the real estate is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Kentucky licensed appraiser from Southern Kentucky Appraisals will ensure you as an interested party are informed.

The inspection is where an appraisal starts

Our first task at Southern Kentucky Appraisals is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Back at the office, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser pulls information on local building costs, the cost of labor and other elements to determine how much it would cost to build a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

For example, if the comparable has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
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.

At Southern Kentucky Appraisals, we are experts when it comes to knowing the value of real estate features in Bowling Green and Warren County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when an area has a measurable number of rental properties. In this situation, the amount of income the property yields 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 applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. 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 a property's market value Depending on the individual situations 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. Regardless, 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 case they had to sell the property again. The bottom line is: An appraiser from Southern Kentucky Appraisals will help you attain the most accurate property value, so you can make the most informed real estate decisions.