An Overview of the Appraisal Process
Their home's purchase can be the biggest transaction many could ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the exchange. Next, the bank provides the money required to fund the deal. And ensuring all requirements of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Price Appraisals & Realty, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Price Appraisals & Realty, LLC is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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 Price Appraisals & Realty, LLC, we are an authority when it comes to knowing the worth of real estate features in Lakeway and Travis County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this case, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Prices can always 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 used 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 sell the property again. It all comes down to this, an appraiser from Price Appraisals & Realty, LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.