What Are the Components of an Appraisal?
Buying a home is the most significant financial decision some of us might ever encounter. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the deal. And ensuring all areas of the sale are completed and that a clear title passes from the seller to the purchaser is the title company.
So, what party makes sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Bullseye Valuation Group will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser uses information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of 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 more accurately portray 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 knowing the true value of features of homes in AUSTIN and Travis, Bullseye Valuation Group is your local authority. The sales comparison approach to value is usually given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the property generates is factored in with other rents in the area for comparable properties to derive 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 subject property. The estimate of value on 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 specific situations 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.Regardless, 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 sell the property again. At the end of the day, an appraiser from Bullseye Valuation Group will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.