The Appraisal Process
Real estate is often times the biggest purchase a person makes in their lifetime, and often the most stressful. With all the different parties involved it’s important to know that federal regulations and guidelines are always at work behind the scenes for the buyer and seller of any property including investment properties, vacant land, rental properties and more.
So what party makes sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay – or a seller receive – for a property, where both buyer and seller are informed parties. This analysis comes from market analysis, experience in the area, and constant peer reviews from other appraisers in the area. A professional Texas licensed appraiser from Trombly Appraisal LLC will ensure you as an interested party are informed. Our company provides appraisals for a variety of transactions.
To determine an accurate status of the property, it’s our duty to first conduct a thorough inspection. To make sure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features – or defects – that would have an impact on the value of the house. We must see aspects of the property hands on, 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 reasonable buyer would expect them to be.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It’s also the least used method. This method is based on cost calculators from national data services and communication with local builders and developers.
Sales Comparison Approach
Appraisers become very familiar with the communities in which they work. The appraiser researches recent transactions in close proximity to the subject and finds properties which are ‘comparable’ to the subject being appraised. By performing a variety of market analysis,peer reviewed dollar values are given to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
- For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
- But, in the case where the subject has something such as an extra half bath that a comparable doesn’t have, the appraiser might add the value of that bath to the comparable property.
In the case of income producing properties – rental houses for example – the appraiser may use a third method of valuing real estate. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the best 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 seller motivation, urgency or ‘bidding wars’ that may adjust the final price 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 put the property on the market again. Here’s what it all boils down to: An appraiser from Trombly Appraisal LLC will help you attain the most fair and balanced property value, so you can make profitable real estate decisions. Additional reporting and market analysis are always performed for clients with specific needs.