What are the components of an appraisal?

Buying real estate can be the most significant investment some will ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a complex 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.


Most of the participants are quite familiar. The real estate agent is the most recognizable entity in the exchange. Then, the bank provides the financial capital necessary to finance the deal. The title company sees to it that all areas of the transaction are completed and that a clear title passes from the seller to the buyer.

So what party is responsible for making sure the real estate is consistent with the amount being paid?   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 professional Texas licensed appraiser from Simon Quality Appraisals will ensure you as an interested party are informed.

Appraisals start with the home inspection

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser employs two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser uses information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This value often 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 neighborhoods in which they work. We innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, extra 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 property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
  • However, 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.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With the Final Value

Analyzing the data from all 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 necessarily what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. Depending on the specific 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. 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 get back in the event they had to put the property on the market again. Here's what it all boils down to: An appraiser from Simon Quality Appraisals will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.