Real Property Appraisals: A Primer

A home purchase is the biggest investment most people might ever consider. It doesn't matter if a main residence, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the transaction is the real estate agent. Next, the bank provides the financial capital required to finance the deal. The title company sees to it that all details of the transaction are completed and that a clear title transfers to the buyer from the seller.

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 property is worth 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 licensed, certified, professional appraiser from Robertson Appraisals, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses 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 the appraiser gathers information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct 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.

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. At Robertson Appraisals, LLC, we are experts in knowing the worth of real estate features in Hot Springs and Garland County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a house is worth, it probably will not be the final sales price. It's not uncommon for prices to 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 used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Robertson Appraisals, LLC will guarantee you get the most accurate property value, so you can make profitable real estate decisions.