Home Appraisals: A Primer

A home purchase can be the most serious investment most of us may ever make. Whether it's a primary residence, an additional vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.

The majority of the people involved are very familiar. The most known entity in the exchange is the real estate agent. Next, the lender provides the financial capital needed to bankroll the exchange. And the title company makes sure that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Hortman Appraisals, LLC. will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical person would expect them to be. To ensure the stated square footage is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser pulls information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray 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.
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. When it comes to putting a value on features of homes in Warner Robins and Houston, Hortman Appraisals, LLC. can't be beat. This approach to value is typically awarded the most importance when an appraisal is for a real estate exchange.

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 case, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But 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 Hortman Appraisals, LLC. will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.