What Is an Appraisal?

Buying a house can be the biggest transaction most of us might ever make. Whether it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Next, the bank provides the financial capital required to fund the deal. And ensuring all requirements of the sale are completed and that the title is clear to pass 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 makes sure the property is worth the purchase price? 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 Big Country Appraisals will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. 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 typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

After the inspection, we use 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

This is where we analyze information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of certain 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 home at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • 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.

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 Big Country Appraisals, we are an authority when it comes to knowing the value of real estate features in Abilene and Taylor County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this situation, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the individual 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 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 Big Country Appraisals will guarantee you get the most accurate property value, so you can make profitable real estate decisions.