Making Sense of the Appraisal ProcessOne's home purchase is the most important investment many people might ever make. It doesn't matter if it's a main residence, an additional vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the exchange. The title company sees to it that all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So who's responsible for making sure the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 professional Texas licensed appraiser from Wells & Associates Appraisal Service will ensure you as an interested party are informed.
Inspecting the subject propertyOur first duty at Wells & Associates Appraisal Service is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, 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 analyze information on local construction costs, labor rates and other factors to calculate 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. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers can tell you a lot about the communities in which they appraise. We thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the property generates is factored in with income produced by nearby properties to give an indicator of the current value.
ReconciliationExamining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. 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. 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 get back in the event they had to put the property on the market again. At the end of the day: An appraiser from Wells & Associates Appraisal Service will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.