What Is an Appraisal?
A home purchase is the most serious transaction some of us could ever consider. It doesn't matter if where you raise your family, a second vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.
Practically all the people involved are quite familiar. The real estate agent is the most recognizable entity in the exchange. Next, the mortgage company provides the financial capital necessary to finance the deal. The title company makes sure that all details of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, who makes 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 estimate 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 Home and Land Appraisal Co. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Home and Land Appraisal Co. is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify 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: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, 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 associating a value with features of homes in Tyler and Smith, Home and Land Appraisal Co. can't be beat. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing real estate. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Home and Land Appraisal Co. will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.