Home Appraisals: A Primer
Acquiring real estate can be the most important financial decision many of us could ever make. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
The majority of the participants are quite familiar. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the financial capital required to fund the deal. And ensuring all areas of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party is responsible for making sure the value of the property is in line with the amount being paid? In comes 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 TEXAS REAL ESTATE APPRAISERS will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local building costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain 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 in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At TEXAS REAL ESTATE APPRAISERS, we are an authority when it comes to knowing the value of particular items in Keene and Johnson County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of revenue the real estate generates is factored in with income produced by similar properties to give an indicator of the current value.
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from TEXAS REAL ESTATE APPRAISERS will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.