Decoding the Appraisal Process

Getting a house can be the biggest financial decision most people might ever make. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.

Most of the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to bankroll the exchange. And ensuring all areas of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.

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So, who's responsible for making sure the value of the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from L&L Appraisal LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first responsibility at L&L Appraisal LLC is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, we pull information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price 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 home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At L&L Appraisal LLC, we are an authority when it comes to knowing the value of particular items in Gonzales and Ascension County neighborhoods. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the real estate produces is factored in with income produced by nearby properties to derive 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. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from L&L Appraisal LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.