Real Property Appraisals: A Primer

Purchasing a home can be the largest transaction some may ever consider. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the deal. And the title company makes sure that all details of the sale are completed and that a clear title passes from the seller to the purchaser.

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? This is where the appraiser comes in. 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 Sniper Residential Appraisal will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

After the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we gather information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they work. They thoroughly 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 real estate at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable property 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.
  • However, 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 Sniper Residential Appraisal, we are experts in knowing the worth of particular items in Little Elm and Denton County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this case, the amount of revenue the real estate produces is taken into consideration along with income produced by comparable properties to determine the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. The bottom line is, an appraiser from Sniper Residential Appraisal will help you get the most accurate property value, so you can make profitable real estate decisions.