What Goes Into an Appraisal?
Buying a home is the biggest transaction many may ever encounter. It doesn't matter if a main residence, a second vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the exchange. Then, the mortgage company provides the financial capital needed to fund the deal. The title company sees to it that all details of the transaction are completed and that the title is clear to transfer from the seller to the buyer.
So, what party is responsible for making sure the value of the real estate is in line with the amount being paid? 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.
The inspection is where an appraisal starts
Our first task at Price Appraisals & Realty, LLC is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use 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 we pull information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of certain features to the homeowners 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 square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Lakeway and Travis, Price Appraisals & Realty, LLC can't be beat. This approach to value is commonly given 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 a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Price Appraisals & Realty, LLC will help you discover the most accurate property value, so you can make wise real estate decisions.