A home purchase is the largest financial decision many people will ever encounter. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Most of the people involved are very familiar. The real estate agent is the most familiar entity in the transaction. Next, the mortgage company provides the financial capital required to finance the exchange. The title company ensures that all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller.
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So, what party makes sure the real estate is worth the amount being paid? 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.
Inspecting the subject property
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser pulls information on local building costs, the cost of labor and other elements to calculate how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the communities in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to 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 more accurately portray the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in the Central Texas Hill Country, Sifford Appraisal, LLC can't be beat. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the most accurate 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. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Sifford Appraisal, LLC will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.