Real Estate Appraisals: A Primer

A home purchase is the largest investment some people may ever make. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.

Practically all the parties involved are very familiar. The most recognizable person in the transaction is the real estate agent. Next, the lender provides the money required to finance the exchange. The title company sees to it that all requirements of the exchange are completed and that the title is clear to pass from the seller to the purchaser.

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So, what party makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 Altizer Appraisals (520) 749-9557 will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To determine an accurate status of the property, it's our duty to first conduct 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 truly are there and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

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

Cost Approach

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

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

For example, if the comparable 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.
However, if the subject property 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 Altizer Appraisals (520) 749-9557, we are experts when it comes to knowing the value of real estate features in Tucson and Pima County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual situations 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. At the end of the day, an appraiser from Altizer Appraisals (520) 749-9557 will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.