Understanding Appraisals

Their home's purchase can be the most important transaction most people might ever encounter. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.

You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the mortgage company provides the financial capital needed to finance the deal. And ensuring all areas of the transaction are completed and that a clear title passes to the buyer from the seller 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 property is worth 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 361 Realty will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use 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 factors to derive how much it would cost to build a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable 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.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At 361 Realty, we are experts when it comes to knowing the worth of real estate features in Corpus Christi and Nueces County neighborhoods. This approach to value is commonly given the most consideration 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 an additional way of valuing a property. In this scenario, the amount of revenue the property yields is factored in with income produced by similar properties to determine the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property 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. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. It all comes down to this, an appraiser from 361 Realty will guarantee you get the most accurate property value, so you can make profitable real estate decisions.