Home Appraisals: A Primer

A home purchase can be the largest transaction many could ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to pull it all off.

You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the exchange. Next, the lender provides the financial capital required to bankroll the deal. And the title company sees to it that all aspects of the sale are completed and that the title is clear to transfer from the seller to the buyer.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the value of the real estate is consistent with the amount being paid? This is where you meet 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 licensed, certified, professional appraiser from Larry Jr Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Larry Jr Appraisals 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 truly are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser uses information on local building costs, the cost of labor and other elements to figure out how much it would cost to construct a property similar 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.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Larry Jr Appraisals, we are an authority in knowing the value of particular items in San Angelo and Tom Green County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the final sales price. 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. It all comes down to this, an appraiser from Larry Jr Appraisals will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.