What is an Appraisal?
Appraisal : (noun) the act or process of developing an opinion of value; an opinion of value. (advective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Acquiring a house is the most important investment some could ever make. Whether it's a primary residence, a seasonal vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Practically all the people involved are quite familiar. The best-known person in the exchange is the real estate agent. Next, the lender provides the financial capital required to fund the deal. The title company ensures that all aspects of the sale are completed and that a clear title passes from the seller to the purchaser.
So, who's responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. 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. A certified professional appraiser from Fortiz Appraisal Services will ensure you, as an interested party, are informed.
Observing the subject property
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough observation. We must see features firsthand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are present and are in the shape a typical buyer would expect them to be. The observation often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Following the observation, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we use information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of specific features to the residents 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 in question. 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 more accurately match the features of subject.
For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
A true estimate of what the subject might sell for can only be determined once all the differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Katy and Harris, Fortiz Appraisal Services is your local authority. This approach to value is usually given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final 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 the property is worth. The bottom line is, an appraiser from Fortiz Appraisal Services will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.