Understanding Appraisals

A home purchase can be the largest investment many of us could ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off.

Practically all the parties participating are very familiar. The real estate agent is the most familiar entity in the exchange. Next, the mortgage company provides the money required to fund the transaction. The title company makes sure that all details of the exchange are completed and that a clear title transfers from the seller to the buyer.

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 value of the real estate is consistent with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Hendy Professional Services, Inc will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To determine an accurate status of the property, it's our responsibility 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 really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies 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 sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we use information on local construction costs, labor rates and other elements to figure out how much it would cost to build a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable property has an irrigation system and the subject does not, the appraiser may subtract 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 could 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 Houston and Harris, Hendy Professional Services, Inc can't be beat. This approach to value is usually given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by comparable properties to determine the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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. The bottom line is, an appraiser from Hendy Professional Services, Inc will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.