Real Property Appraisals: A Primer

A home purchase can be the most important transaction some could ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

Most of the participants are very familiar. The real estate agent is the most known face in the exchange. Then, the bank provides the financial capital necessary to fund the transaction. And ensuring all aspects of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.

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 value of the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Charla Parsons Appraisal Company will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.

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

Cost Approach

Here, we use information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra 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.

  • If, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • But, 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 knowing the true worth of features of homes in West Texas, Charla Parsons Appraisal Company can't be beat. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the real estate generates is factored in with income produced by comparable properties to determine the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it probably will not be the final sales price. Depending on the specific situations 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.Regardless, the appraised value is often used 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 Charla Parsons Appraisal Company will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.