Real Estate Appraisals: A Primer

One's home purchase is the most serious financial decision some people may ever encounter. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.


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

It's likely you are familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Next, the mortgage company provides the money needed to bankroll the exchange. The title company ensures that all areas of the sale are completed and that the title is clear to transfer from the seller to the purchaser.

So who's responsible for making sure the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional New Mexico licensed appraiser from Winton Appraisal Company will ensure you as an interested party are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify 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 when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser uses information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the communities in which they appraise. We innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
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.

At Winton Appraisal Company, we are an authority in knowing the value of particular items in Socorro and Socorro County neighborhoods. This approach to value is usually given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property produces is taken into consideration along with income produced by comparable properties to determine the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a house would sell for in an open market, it probably will not be the final sales price. Depending on the individual 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 often employed 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 Winton Appraisal Company will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.