A Description of the Appraisal ProcessA home purchase is the biggest investment some will ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the money necessary to fund the deal. The title company makes sure that all details of the transaction are completed and that a clear title transfers to the buyer from the seller.
So who's responsible for making sure the value of the real estate is in line with the amount being paid? This is where you meet 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 professional Texas licensed appraiser from Farmer Appraisal Services will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Farmer Appraisal Services is to inspect the property to ascertain its true status. We must see features first hand, 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 reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where we use information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales AnalysisAppraisers become very familiar with the subdivisions in which they work. We thoroughly 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 property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray the features of subject property.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate produces is factored in with income produced by neighboring properties to derive the current value.
The Bottom LineCombining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a property would sell for in an open market, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 recover in case they had to put the property on the market again. At the end of the day: An appraiser from Farmer Appraisal Services will help you get the most accurate property value, so you can make the most informed real estate decisions.