Real Property Appraisals: A Primer

One's home purchase is the biggest investment most people might ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.


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Most people are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the money needed to fund the exchange. The title company sees to it that all details of the sale are completed and that the title is clear to transfer to the buyer from the seller.

So what party makes sure the value of the property is in line with the purchase price? 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 parcel of real estate, where both buyer and seller are informed parties. A professional Texas licensed appraiser from Texas Real Estate Office 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 see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for 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 when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

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

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. We thoroughly understand the value of particular 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 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 more accurately portray the features of subject property.

For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
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.

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. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: 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 price at which the property closes. 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'. But the appraised value is often 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. The bottom line is: An appraiser from Texas Real Estate Office will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.