Buying a house is the largest transaction many people could ever consider. Whether it's a primary residence, an additional vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Next, the mortgage company provides the financial capital needed to fund the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, what party makes sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 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
To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies 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: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser gathers 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 value usually sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
An opinion of what the subject might 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 value of features of homes in Lakeway and Travis, Price Appraisals & Realty, LLC is your local authority. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the property generates is factored in with income produced by comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. The bottom line is, an appraiser from Price Appraisals & Realty, LLC will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.