What are the components of an appraisal?

Getting a home can be the most important investment most people could ever consider. It doesn't matter if it's where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.


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It's likely you are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to bankroll the deal. Ensuring all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

So what party is responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Texas licensed appraiser from Hemry Appraisal Services will ensure you as an interested party are informed.

Appraisals begin with the inspection

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are present and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, 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 analyze information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they work. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to 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.

For example, if the comparable property 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.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

At Hemry Appraisal Services, we are an authority when it comes to knowing the value of real estate features in Lewisville and Denton County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. It all comes down to this: An appraiser from Hemry Appraisal Services will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.