Understanding Appraisals

A home purchase is the biggest investment many will ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to see it through.

Practically all the people involved are very familiar. The most recognizable entity in the exchange is the real estate agent. Next, the mortgage company provides the money needed to bankroll the transaction. And the title company sees to it that all details of the sale 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 amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Open Book Real Estate Professionals, LLC dba Bodine Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Open Book Real Estate Professionals, LLC dba Bodine Appraisal Services is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use 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.

Replacement Cost

Here, we gather information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales 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 additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, 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.
  • 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.

A true estimate 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 Denton and Denton, Open Book Real Estate Professionals, LLC dba Bodine Appraisal Services can't be beat. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Open Book Real Estate Professionals, LLC dba Bodine Appraisal Services will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.