Understanding Appraisals

Their home's purchase is the most significant transaction some of us will ever encounter. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most people are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Then, the bank provides the financial capital required to finance the deal. And ensuring all requirements of the transaction are completed and that a clear title transfers from the seller to the buyer 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, what party makes 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 Jordan Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Jordan Services is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - 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 the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Lufkin and Angelina, Jordan Services is your local authority. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of income the property yields is factored in with income produced by neighboring properties to derive the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. Depending on the individual 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.Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. At the end of the day, an appraiser from Jordan Services will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.