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Understanding Appraisals

Acquiring real estate can be the biggest transaction many of us will ever make. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the lender provides the money necessary to fund the exchange. And ensuring all details of the transaction are completed and that the title is clear to pass 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 makes sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Zacour & Associates, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

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

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 analyze information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value 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 innately understand the value of specific 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 property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A valid 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 associating a value with features of homes in El Paso and El Paso, Zacour & Associates, Inc. can't be beat. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this case, the amount of income the property yields is taken into consideration along with income produced by neighboring properties to determine the current value.

The Bottom Line

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 specific situations 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.But 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 Zacour & Associates, Inc. will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.