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An appraiser determines a home’s appraised value by looking at factors such as square feet, number of bedrooms, number of bathrooms, the location of the property, and the age of the property. Any improvements made to the home, as well as market conditions, will be taken into account. The appraiser then compares the data on your home to other comparable properties’ data and the market to arrive at your home's value.

Because the bank ordered the appraisal, per federal regulations, the appraiser cannot discuss the findings with you unless the bank gives written permission. Per the requirements of The Consumer Financial Protection Bureau, your lender will provide you with a copy as soon as the mortgage company receives it (or at least three days before closing.) Although you may waive your right to receive a copy of the appraisal, it’s good to review it so that you understand how your lender is determining the amount of your loan.

You and your realtor should review the report to see which homes were chosen for comparison, and to make sure the appraisal includes accurate information and takes into account intangible things that can add value to a home, such as location in a highly-rated school district.

Residential Appraisals

Pre-Listing Appraisals

Realtors, potential sellers, and attorneys often want to know what the square footage of a property is before they proceed with any type of sale, refinance, litigation, etc. Sometimes if a property has had an add-on or renovation, or changes have been made to the gross living area of a property, it needs to be verified for accuracy.

Realtors often have a unique property, luxury property, or acreage property with ancillary improvements that require a pre-listing appraisal prior to the subject property being put on the open market for sale. Also, some properties need a pre-listing appraisal when there is limited sales data for comparables.

The Gross Living Area Measurement Process

An appraiser arrives at a property and measures the exterior of the residence from the outside brick. If there is a second floor, the appraiser measures the second floor from the inside upstairs, taking into consideration the exterior of the subject property. Appraisers measure a property in different ways but all use the same basic measurement guidelines as in the Ansi Method Measurement. The ANSI standards base floor area calculations on the exterior dimensions of the building at each floor level and include all interior walls and voids. For attached units, the outside dimension is the centerline of the common walls. Internal room dimensions aren’t used in this system of measuring.

Pre-Listing Appraisal Process

A pre-listing appraisal is an appraisal done by an appraiser before a property is listed for sale. The appraiser will inspect the property inside and outside, measure the property, take photos, and note the condition and quality of construction. The appraiser will consider factors such as square footage, number of bedrooms, number of bathrooms, location, and age of the property, as well as any upgrades and market conditions, to determine the pre-listing appraised value of the property. The listing agent or seller pays for the appraisal fee. The appraiser will then compare the property data to other similar properties and the market to estimate the pre-listing value of the property.

What are the benefits of hiring an appraiser for a pre-listing appraisal?

Scenario 1

A person wants to sell their home but does not know what it is worth. An appraisal will help them find out the possible selling price of their property.

Scenario 2

A listing agent has a property that is very different from other properties in the same neighborhood and is not sure how to choose comparable properties. An appraiser can do a pre-listing appraisal to help them identify the best comparable properties for giving the most accurate appraised value before listing.

Scenario 3

A potential seller has a property that has had several additions that may or may not be included in the living area. A living area calculation will help them determine the actual living area of the property.

Scenario 4

A listing agent has a high-end luxury property that is over 10,000 sf and every square foot matters. An appraiser can do a living area calculation to ensure the correct square footage before listing the property.

Luxury real estate is defined differently in different markets because property values, median resident income, and area development vary depending on the metro area. Lenders require an appraisal on a luxury home before they’ll approve a mortgage loan because the property is the underlying asset that serves as collateral for the loan.

The Luxury home appraisal process

The luxury home appraisal process is very similar to that of appraising a standard single-family residential home. However, if the appraiser is not familiar with the specialized and custom features of a luxury home, he or she can not properly analyze the benefit and/or value added by these features. Luxury homes typically have higher cost, natural stones, woods, historical features, custom lighting, energy efficient items, etc. To identify these features, an appraiser must be well versed and familiar with identifying the latest construction trends as well as identifying the quality and benefit added by these custom features.

How do you identify an appraiser that is qualified for luxury homes?

Experience plays a key role in identifying an appraiser qualified to appraise a luxury home. An appraiser that has been exposed to a market over several years understands those custom features that provide a favorable appeal to the market. Additionally, a seasoned appraiser will have been exposed to countless hours of continuing education, many of which focus on construction design, materials, and efficiency.

Anyone that is involved in real estate knows that location is a key component of value. An appraiser who specializes in luxury home appraisals must have a great relationship with the real estate agents and brokers that serve the location of those luxury residences. Find out what relationships the appraisers has with local realtors that specialize in luxury homes. Many times, you will find these realtors will recommend qualified appraisers as they have built relationships with appraisers who call verifying sales data and attributes.

Luxury Residential Appraisals

Equal & Uniform Analysis

According to Section 42.26 of the Texas Property Tax Code, an equal and uniform analysis is a valid appraisal method. This method allows a property owner to seek relief from unequal appraisal if:

(a) The appraisal ratio of the property is at least 10 percent higher than the median appraisal ratio of a fair and representative sample of other properties in the same appraisal district;

(b) The appraisal ratio of the property is at least 10 percent higher than the median appraisal ratio of a sample of properties in the same appraisal district that are similar to, or of the same general type or quality as, the property under appeal; or

(c) The appraised value of the property is higher than the median appraised value of a fair number of comparable properties that are properly adjusted.

The district court must grant relief to the property owner who meets one or more of these criteria by lowering the property's appraised value to the value that corresponds to the lowest median appraisal ratio or median appraised value under these criteria. The court must follow the law and not rely on the median appraisal ratio or median appraised value proposed by any party to the appeal. The court cannot deny or limit relief to the property owner who qualifies for relief under one criterion because another criterion would result in a higher appraised value.

To determine the median appraisal ratio under criterion (a), the median appraisal ratio in the appraisal district as calculated by the comptroller under Section 5.10 can be used as evidence of the median appraisal ratio of a fair and representative sample of properties in the same appraisal district for the year of the comptroller's calculation, subject to the rules of evidence and civil procedure.

For this method, the value of the property under appeal and the value of a comparable property or sample property that is used for comparison must be the market value set by the appraisal district when the property is a residence homestead with a cap on appraised value under Section 23.23.

If a state certified appraiser prepares this analysis, then the appraisal must comply with the Uniform Standards of Professional Appraisal Practice (USPAP) and is subject to oversight by the Texas Appraiser Licensing and Certification Board based on Opinion No. GA-0911 issued February 7, 2012 by Attorney General Greg Abbott. These analyses are not regulated by TALCB for people who are not certified or licensed as appraisers. Therefore, appraisers are often preferred for these analyses because of their expertise and impartiality required by their standards.

Many ranches are used for recreation rather than agriculture, because the farming income is not enough to justify the ranch value. Ranch properties are hard to appraise, because they have different uses and features that affect their value, such as family recreation, hunting, weekend getaways and corporate retreats, along with typical ranch activities. The value of these properties can change a lot depending on the improvements they have. Appraisers can usually find similar sales, but they need to spend time and research to find them and analyze them correctly.

The shape and features of the large acreage sites can impact how they are used and how attractive they are. The property's terrain, cultivated land, pasture, water features, elevation changes, trees, views, natural habitat, mineral interests, fencing, and livestock and wildlife are important factors to consider. A narrow or irregular shape may restrict the use potential or make the land management hard. Whether the property is mostly raw land or ready for development can also affect the appraised value.

It’s often the case that the appraiser has to look for comparable sales or listing data from far away and compare different characteristics to estimate a fair value. A ranch or recreational ranch might have only a few similar properties in the same county, and those properties may have been owned by the same people for a long time.

Appraisals for Large Acreage and Ranches

Commercial Real Estate Appraisals

A commercial real estate appraisal is similar to a home appraisal, as both are based on the same principles. Commercial appraisers examine and give an opinion of market value of various kinds of commercial properties, such as land, office buildings, industrial buildings, shopping centers, fitness facilities, hotels, and other commercial establishments.

Different types of commercial properties require different levels of expertise. We specialize in valuing existing and proposed commercial land, small office buildings, retail buildings, industrial properties, warehouse properties, restaurant properties, specialty use properties, and office condominium units. Three types of analysis are usually used: the sales comparison approach, the cost approach, and the income approach.

The Sales Comparison Approach

The sales comparison approach compares the sales data of properties that are similar to the property being appraised. This is often the preferred approach to estimate value, but similar properties or data may not always be available, especially in areas of new development.

The Cost Approach

The cost approach estimates value based on the cost to build a property and the value of the land. This method is based on the relationship of cost and value. An appraiser will estimate the cost to build the property (known as the replacement cost) and then apply deductions for any physical deterioration, functional issues, and external market factors.

The Income Approach

The income approach is based on the income potential of the property. An appraiser will estimate the net operating income of a property by reviewing the historical operating data of the property and comparable properties, and other market information. The most commonly used method in the income approach is the direct capitalization method: dividing the net operating income by a capitalization rate.

When an estate needs to be settled or a lawsuit involves a property, an appraiser who is skilled and confident in supporting or defending their work is needed. Often, these kinds of appraisals can be questioned and an appraiser who knows the valuation process and who can back up their work will be helpful to get through this process. ValQuest has this kind of expertise and strives to provide a quality report.

Appraisers at ValQuest have experience in a wide range of valuations and/or consultations for different situations. The following is a summary of issues and/or valuations that we have worked on:

The added value of a hypothetical assumed pool for a residential home
The effect of value of a home after the color of a roof was changed
Past value before a home was damaged and destroyed
Value analysis after mold removal
Value analysis assuming a stable property that has structural problems
Value analysis after assumed repairs and stabilization of structural problems
Consultation and appraisals for divorce cases
Valuations before foreclosure
Valuations for federal court bankruptcy
Valuations for possible mortgage fraud
Consultation and valuations for property tax lawsuits

Estate & Litigation Support