What Are the Components of an Appraisal?
Buying real estate is the biggest investment some of us may ever consider. Whether it's where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.
Practically all the participants are quite familiar. The most known person in the exchange is the real estate agent. Next, the bank provides the money needed to fund the transaction. And ensuring all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party makes 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 TEXAS REAL ESTATE APPRAISERS will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use 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 use information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the maximum 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 innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. 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 are more accurately in line with the features of subject property.
A true 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 knowing the true worth of features of homes in Keene and Johnson, TEXAS REAL ESTATE APPRAISERS can't be beat. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always 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.Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from TEXAS REAL ESTATE APPRAISERS will help you get the most fair and balanced property value, so you can make wise real estate decisions.