Home Appraisals: A Primer

A home purchase is the biggest investment some people may ever make. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.

Most of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the deal. And ensuring all requirements of the exchange are completed and that the title is clear to pass 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 property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 C2 Advisory Group LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on 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, the appraiser uses information on local building costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may subtract 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.

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. When it comes to associating a value with features of homes in Katy and Fort Bend, C2 Advisory Group LLC is second to none. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a measurable number of rental properties. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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. It all comes down to this, an appraiser from C2 Advisory Group LLC will help you attain the most fair and balanced property value, so you can make wise real estate decisions.