What Goes Into an Appraisal?

Their home's purchase can be the largest transaction some people will ever consider. Whether it's a main residence, a second vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.

Practically all the parties involved are quite familiar. The most familiar face in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to bankroll the transaction. The title company makes sure that all details of the exchange are completed and that the title is clear to pass from the seller to the buyer.

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So, who makes sure the property 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Burton Appraisal Group, LLC (915) 449-8855 will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first task at Burton Appraisal Group, LLC (915) 449-8855 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, and so on, to ensure they truly are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser pulls information on local construction costs, the cost of labor and other factors to ascertain 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 method.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
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.

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 Burton Appraisal Group, LLC (915) 449-8855, we are experts when it comes to knowing the value of real estate features in El Paso and El Paso County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always 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'. Regardless, the appraised value is typically 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 Burton Appraisal Group, LLC (915) 449-8855 will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.