Home Appraisals: A Primer

Acquiring a house can be the most significant investment many of us could ever encounter. It doesn't matter if a main residence, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.

The majority of the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Next, the bank provides the money necessary to bankroll the deal. And the title company makes sure that all areas of the sale are completed and that a clear title passes to the buyer from the seller.

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 is responsible for making sure the real estate is worth the amount being paid? In comes 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 licensed, certified, professional appraiser from Brazeal Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Brazeal Appraisals is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Once the site has been inspected, 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.

Replacement Cost

Here, we gather information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This estimate often sets the upper limit 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. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, additional 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 portray the features of subject property.

For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Brazeal Appraisals, we are experts when it comes to knowing the worth of particular items in The Colony and Denton County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the individual circumstances 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.But the appraised value is typically used 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. Here's what it all boils down to, an appraiser from Brazeal Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.