Home Appraisals: A Primer

Getting a home is the largest investment most people might ever consider. It doesn't matter if it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is a detailed 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.


Practically all the parties participating are very familiar. The most familiar face in the transaction is the real estate agent. Next, the lender provides the financial capital needed to fund the exchange. The title company ensures that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.

So what party makes sure the value of the real estate is consistent with the purchase price?   In comes the appraiser.   We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Texas licensed appraiser from Shell PAS Enterprises, LLC will ensure you as an interested party are informed.

Appraisals start with the home inspection

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a typical person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser uses information on local building costs, the cost of labor and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they appraise. We innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable property 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.
  • 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.
At Shell PAS Enterprises, LLC, we are an authority when it comes to knowing the value of real estate features in Houston and Harris County neighborhoods. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the real estate generates is taken into consideration along with income produced by similar properties to give an indicator of the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house would sell for in an open market, it probably will 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. It all comes down to this: An appraiser from Shell PAS Enterprises, LLC will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.