Real Estate Appraisals: A Primer

Buying real estate can be the most important investment most of us might ever encounter. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

Practically all the participants are quite familiar. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the money required to fund the deal. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the buyer 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, who's responsible for making sure the real estate is worth the amount being paid? 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 MC Appraisal Services, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at MC Appraisal Services, LLC is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

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 property at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

Say, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At MC Appraisal Services, LLC, we are experts in knowing the value of real estate features in Fort Worth and Tarrant County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property 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'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. The bottom line is, an appraiser from MC Appraisal Services, LLC will help you attain the most fair and balanced property value, so you can make wise real estate decisions.