What are the parts of an appraisal?

One's home purchase is the most important transaction some people may ever encounter. It doesn't matter if it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

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


Practically all the participants are quite familiar. The most known face in the exchange is the real estate agent. Then, the lender provides the financial capital needed to finance the deal. The title company ensures that all details of the sale are completed and that the title is clear to transfer from the seller to the buyer.

So what party makes sure the property is consistent with the purchase price?   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 professional Texas licensed appraiser from Edwards Appraisals will ensure you as an interested party are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are there and are in the shape a typical buyer 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 includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we gather information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the communities in which they appraise. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject at hand. 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system 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.
When it comes to valuing features of homes in Austin and Travis, Edwards Appraisals can't be beat. This approach to value is typically given the most weight when an appraisal is for a home 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 situation, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a house would sell for in an open market, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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 would likely sell for in an open marketplace. The bottom line is: An appraiser from Edwards Appraisals will help you get the most fair and balanced property value, so you can make wise real estate decisions.