Home Appraisals: A Primer

Acquiring real estate can be the most important transaction some of us might ever consider. Whether it's a main residence, an additional vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the transaction. And 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 buyer.

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

So, what party makes sure the property is worth 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from TCI Technologies will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at TCI Technologies is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Next, after 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.

Replacement Cost

Here, the appraiser analyzes information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. 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 adjust the comparable properties so that they more accurately portray the features of subject property.

  • If, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At TCI Technologies, we are an authority in knowing the value of real estate features in Williston Park and Nassau County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home sale.

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 scenario, the amount of income the property generates is factored in with income produced by nearby properties to determine the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a property is worth, it probably will 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from TCI Technologies will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.