Real Property Appraisals: A Primer
A home purchase can be the biggest investment some people will ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the transaction. Next, the lender provides the financial capital necessary to bankroll the transaction. And ensuring all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. 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
Our first task at Price Appraisals & Realty, LLC is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a typical buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra 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.
A valid 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 associating a value with features of homes in Lakeway and Travis, Price Appraisals & Realty, LLC is your local authority. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the property yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. Depending on the specific 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 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. Here's what it all boils down to, an appraiser from Price Appraisals & Realty, LLC will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.