Understanding Appraisals

Purchasing real estate can be the most important transaction many of us may ever consider. It doesn't matter if a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is an involved 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.

Most people are familiar with the parties taking part in the transaction. The most familiar face in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to fund the transaction. The title company sees to it that all aspects of the sale are completed and that a clear title passes to the buyer from the seller.

So what party is responsible for making sure the property is worth the amount being paid? This is where you meet the appraiser. 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 licensed, certified, professional appraiser from TEXAS REAL ESTATE APPRAISERS will ensure you as an interested party are informed.

Appraisals start with the home inspection

Our first duty at TEXAS REAL ESTATE APPRAISERS is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed exist and are in the shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and document the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we gather information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This figure usually 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 are intimately familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

For example, if the comparable property has an extra half bath that the subject doesn't, 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Keene and Johnson, TEXAS REAL ESTATE APPRAISERS can't be beat. This approach to value is typically given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a measurable number of rental properties. In this case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is: An appraiser from TEXAS REAL ESTATE APPRAISERS will guarantee you attain the most accurate property value, so you can make wise real estate decisions.