What Is an Appraisal?

Getting a house is the biggest financial decision many could ever encounter. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to see it through.

Practically all the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Then, the bank provides the money needed to bankroll the transaction. And ensuring all requirements of the exchange are completed and that the title is clear to transfer 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, who's responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Boynton Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Boynton Appraisal Services is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Peyton and El Paso, Boynton Appraisal Services is your local authority. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

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

Reconciliation

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Boynton Appraisal Services will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.