Home Appraisals: A Primer

Getting real estate is the most important investment most of us might ever consider. It doesn't matter if it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.


Most of the people involved are quite familiar. The real estate agent is the most familiar entity in the exchange. Next, the bank provides the financial capital required to bankroll the transaction. Ensuring all details of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

So who makes sure the real estate is consistent with the purchase price?   This is where you meet 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 MCA Real Estate Services Inc. will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser pulls information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the communities in which they appraise. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, 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.
  • 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.
At MCA Real Estate Services Inc., we are experts when it comes to knowing the value of real estate features in Houston and Harris County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a property would sell for in an open market, it may not be the final sales price. 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 used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from MCA Real Estate Services Inc. will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.