Home Appraisals: A Primer

Acquiring real estate can be the most serious investment many of us will ever consider. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the lender provides the money needed to fund the exchange. And the title company ensures that all details of the exchange are completed and that a clear title transfers to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the real estate is worth the purchase price? In comes 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 licensed, certified, professional appraiser from Bedford Hunt will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other elements to calculate how much it would cost to build a property nearly identical 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.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • If the subject 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. At Bedford Hunt, we are experts in knowing the worth of particular items in Senatobia and Tate County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by comparable properties to determine the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Bedford Hunt will help you get the most accurate property value, so you can make the most informed real estate decisions.