Real Property Appraisals: A Primer

One's home purchase can be the most serious investment some people might ever encounter. Whether it's a main residence, an additional vacation home or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.


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You're likely to be familiar with the parties taking part in the transaction. The most familiar face in the exchange is the real estate agent. Next, the lender provides the financial capital needed to finance the deal. The title company makes sure that all areas of the sale are completed and that the title is clear to pass from the seller to the purchaser.

So who's responsible for making sure the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 professional Texas licensed appraiser from Bain & Associates, Inc. Real Estate Appraisers will ensure you as an interested party are informed.

Appraisals start with the property inspection

To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Following the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we pull information on local building costs, the cost of labor and other factors to calculate how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

If, for example, the comparable property 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.
However, 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.

When it comes to associating a value with features of homes in Plano and Collin, Bain & Associates, Inc. Real Estate Appraisers can't be beat. This approach to value is most often given the most importance 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 real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Bain & Associates, Inc. Real Estate Appraisers will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.