Real Property Appraisals: A Primer

Purchasing a home can be the most serious financial decision some people may ever consider. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.

Practically all the people involved are quite familiar. The real estate agent is the most known entity in the exchange. Then, the mortgage company provides the money needed to fund the exchange. And ensuring all aspects of the sale 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, what party is responsible for making sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Zing Appraisals LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Back at the office, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where we analyze information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • If, for example, the comparable 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, 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.

In the end, 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 Colorado Springs and El Paso, Zing Appraisals LLC is second to none. This approach to value is typically awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by nearby properties to determine the current value.

Putting It All Together

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 strongest indication of what a property is worth, it may not be the price at which the property closes. Depending on the specific 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. It all comes down to this, an appraiser from Zing Appraisals LLC will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.