What Are the Components of an Appraisal?
A home purchase is the biggest financial decision some might ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is an involved transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Then, the mortgage company provides the money required to finance the deal. And ensuring all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, 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.
Appraisals start with the home inspection
Our first task at Price Appraisals & Realty, LLC is to inspect the property to ascertain its true status. We must see aspects of the property first hand, 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 person would expect them to be. To ensure the stated square footage is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
A valid estimate of what the subject might 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 experts in knowing the worth of particular items in Lakeway and Travis County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with income produced by nearby 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 put down an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the individual circumstances 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 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 Price Appraisals & Realty, LLC will help you discover the most accurate property value, so you can make profitable real estate decisions.