What are the components of an appraisal?Buying real estate can be the largest financial decision some of us will ever make. Whether it's a primary residence, an additional vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most familiar face in the exchange. Next, the lender provides the financial capital necessary to finance the deal. The title company sees to it that all details of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So who's responsible for making sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Texas licensed appraiser from Appraisal House, Inc. will ensure you as an interested party are informed.
Appraisals start with the home inspectionTo ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where we pull information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers get to know the subdivisions in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this scenario, the amount of revenue the property yields is factored in with income produced by nearby properties to determine the current value.
ReconciliationCombining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 they could recover in the event they had to sell the property again. The bottom line is: An appraiser from Appraisal House, Inc. will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.