What Goes Into an Appraisal?

Buying real estate can be the most important investment some will ever encounter. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the transaction. And ensuring all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, who's responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Finley Appraisals, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Finley Appraisals, LLC is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser pulls information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the communities 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 close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 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 an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Fort Worth and Tarrant, Finley Appraisals, LLC is second to none. This approach to value is typically given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the property produces is taken into consideration along with income produced by similar properties to determine the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the best indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific circumstances 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 the property is actually worth. Here's what it all boils down to, an appraiser from Finley Appraisals, LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.