What Is an Appraisal?

A home purchase is the most important investment some of us will ever encounter. It doesn't matter if a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.

Most people 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 mortgage company provides the money necessary to bankroll the exchange. And ensuring all requirements of the exchange are completed and that a clear title passes from the seller to the buyer is the title company.

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So, what party makes sure the value of the real estate is consistent with the amount being paid? 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 North Texas Appraisal Review will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first responsibility at North Texas Appraisal Review is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property is accurate and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser pulls information on local building costs, labor rates and other factors to determine 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 predictor of value.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. At North Texas Appraisal Review, we are an authority when it comes to knowing the worth of real estate features in Little Elm and Denton County neighborhoods. This approach to value is typically given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

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

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. 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 valueDepending 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.But the appraised value is often employed 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. Here's what it all boils down to, an appraiser from North Texas Appraisal Review will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.