Home Appraisals: A Primer

Their home's purchase can be the biggest financial decision some of us might ever make. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.

You're likely to be familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Then, the bank provides the money required to finance the transaction. The title company sees to it that all details of the exchange are completed and that the title is clear to transfer 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, who's responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Laredo Appraisal Group, LLC. will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, 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 house.

Back at the office, 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, we pull information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath 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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Laredo Appraisal Group, LLC., we are an authority in knowing the value of particular items in Laredo and Webb County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by similar properties to derive the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. Prices can always 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Laredo Appraisal Group, LLC. will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.