Comprehending Appraisals

Their home's purchase can be the most important transaction most people could ever consider. It doesn't matter if a main residence, a seasonal vacation property or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple parties to see it through.

It's likely you are familiar with the parties taking part in the transaction. The most familiar entity in the exchange is the real estate agent. Then, the bank provides the money required to fund the deal. And the title company makes sure that all details of the sale are completed and that the title is clear to transfer to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 begin with the property inspection

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, 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.

Cost Approach

Here, we use information on local construction costs, the cost of labor and other factors to derive how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, additional 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.

  • For example, if the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • 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.

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 when it comes to knowing the worth of real estate features in Lakeway and Travis County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by nearby properties to determine the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may not be the final sales price. 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Price Appraisals & Realty, LLC will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.