Real Estate Appraisals: A PrimerGetting real estate can be the most important investment many may ever consider. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.
The majority of the participants are quite familiar. The real estate agent is the most recognizable face in the transaction. Next, the lender provides the money required to fund the deal. Ensuring all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So what party makes sure the real estate is consistent with the purchase price? In comes the appraiser. 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 professional Texas licensed appraiser from Reeder Appraisal Services, LLC will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, the appraiser pulls information on local building costs, labor rates and other elements to determine how much it would cost to build a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Sales ComparisonAppraisers are intimately familiar with the subdivisions in which they work. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of revenue the real estate produces is factored in with income produced by nearby properties to determine the current value.
ReconciliationCombining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a house would sell for in an open market, it probably will not be the price at which the property closes. 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 used 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 Reeder Appraisal Services, LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.