What Goes Into an Appraisal?

Acquiring a home can be the most important financial decision most could ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Most of the people participating are very familiar. The most familiar face in the exchange is the real estate agent. Then, the bank provides the financial capital necessary to fund the transaction. The title company makes sure that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.

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So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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 Longhorn Appraisals & Real Estate will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. 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 exist and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, we use 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 pulls information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of 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 more accurately match the features of subject property.

  • If, 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.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Brownsville and Cameron, Longhorn Appraisals & Real Estate is second to none. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of income the property generates is factored in with income produced by nearby properties to give an indicator of the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. 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'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Longhorn Appraisals & Real Estate will help you attain the most accurate property value, so you can make wise real estate decisions.