A Description of the Appraisal Process

Getting a house is the most significant investment some of us could ever make. It doesn't matter if a primary residence, a second vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to see it through.

Practically all the participants are very familiar. The real estate agent is the most familiar face in the exchange. Then, the bank provides the financial capital necessary to bankroll the exchange. The title company makes sure that all aspects of the exchange are completed and that a clear title passes to the buyer from the seller.

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So, who's responsible for making sure the property 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 MDA Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Next, after the inspection, 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 the appraiser analyzes information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable 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.
  • 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.

After all differences have been accounted for, 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 putting a value on features of homes in Murphy and Collin, MDA Appraisals, LLC can't be beat. The sales comparison approach to value is usually given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to stipulate 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 a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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. The bottom line is, an appraiser from MDA Appraisals, LLC will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.