Making Sense of the Appraisal Process

Their home's purchase is the most significant transaction some might ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Next, the lender provides the money needed to bankroll the exchange. And ensuring all areas of the exchange are completed and that a clear title passes 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 value of the property is in line 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Maverick Appraisal Group 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 duty to first perform a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.

Next, after the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser gathers information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This figure often 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 particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional 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 has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion 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 putting a value on features of homes in Houston and Harris, Maverick Appraisal Group can't be beat. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best 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 seller motivation, urgency or 'bidding wars' that may adjust the final 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 they could recover in case they had to put the property on the market again. At the end of the day, an appraiser from Maverick Appraisal Group will guarantee you attain the most accurate property value, so you can make wise real estate decisions.