Understanding the Appraisal Process

Their home's purchase can be the biggest investment most people may ever make. It doesn't matter if a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to see it through.

Most of the people involved are quite familiar. The real estate agent is the most known entity in the exchange. Next, the bank provides the money required to bankroll the deal. The title company sees to it that all details of the sale are completed and that a clear title passes from the seller to the purchaser.

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So, what party makes sure the value of the property is consistent with 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 El Paso Appraisal Associates, LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first task at El Paso Appraisal Associates, LLC is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we use information on local building costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject being appraised. 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 portray the features of subject.

  • If, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true worth of features of homes in El Paso and El Paso, El Paso Appraisal Associates, LLC is second to none. This approach to value is most often given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when an area has a reasonable number of renter occupied properties. In this situation, the amount of income the property produces is factored in with income produced by comparable properties to determine the current value.

The Bottom Line

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from El Paso Appraisal Associates, LLC will help you discover the most accurate property value, so you can make wise real estate decisions.