Real Property Appraisals: A Primer
Acquiring a house is the biggest transaction some could ever encounter. Whether it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the mortgage company provides the money required to bankroll the transaction. The title company makes sure that all requirements 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 purchase price? In comes the appraiser. 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 licensed, certified, professional appraiser from Timely Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses 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 pulls information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property at hand. 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 more accurately match the features of subject.
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. At Timely Appraisal Services, we are experts in knowing the worth of real estate features in Quinlan and Hunt County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the individual 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.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 case they had to sell the property again. The bottom line is, an appraiser from Timely Appraisal Services will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.