Real Property Appraisals: A Primer
Getting real estate can be the most important transaction most people will ever consider. Whether it's a primary residence, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.
You're probably familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the lender provides the financial capital needed to fund the exchange. And ensuring all requirements of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, who's responsible for making sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from G and R Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at G and R Appraisal Service 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 really are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, the cost of labor and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject 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. At G and R Appraisal Service, we are experts in knowing the worth of particular items in El Paso and El Paso County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used 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. The bottom line is, an appraiser from G and R Appraisal Service will guarantee you get the most accurate property value, so you can make wise real estate decisions.