Decoding the Appraisal Process

Their home's purchase is the most important investment most of us may ever encounter. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

Practically all the participants are very familiar. The most known entity in the exchange is the real estate agent. Then, the lender provides the financial capital necessary to fund the deal. And ensuring all aspects of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

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So, what party is responsible for making sure the value of the property is in line with 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 AB Appraisal Services TX LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at AB Appraisal Services TX LLC is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

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

Replacement Cost

Here, we analyze information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of 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 more accurately portray the features of subject.

Say, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace 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.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At AB Appraisal Services TX LLC, we are an authority when it comes to knowing the value of particular items in Temple and Bell County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, 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 the property is actually worth. Here's what it all boils down to, an appraiser from AB Appraisal Services TX LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.