Real Property Appraisals: A Primer

A home purchase can be the largest financial decision some will ever make. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

You're likely to be familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Then, the lender provides the money required to finance the transaction. And ensuring all aspects of the sale are completed and that a clear title passes from the seller to the buyer is the title company.

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

So, who makes 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Streich Enterprises, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain the true 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, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, we use two or three approaches to determining the value of the 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 elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price 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.

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 Streich Enterprises, LLC, we are an authority in knowing the worth of particular items in Tulsa and Tulsa County neighborhoods. This approach to value is usually awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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. Here's what it all boils down to, an appraiser from Streich Enterprises, LLC will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.