A Description of the Appraisal Process
A home purchase can be the biggest financial decision most people could ever encounter. Whether it's a primary residence, a second vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to see it through.
You're probably familiar with the parties taking part in the transaction. The most familiar face in the transaction is the real estate agent. Next, the lender provides the money necessary to bankroll the deal. And ensuring all requirements of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.
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 could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from LHC Appraisals will ensure, you as an interested party, are informed.
Appraisals start with the inspection
To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local building costs, labor rates and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the communities 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 home being appraised. By assigning a dollar value to 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 match the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At LHC Appraisals, we are experts in knowing the worth of particular items in Denton and Denton County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a house is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often employed 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. It all comes down to this, an appraiser from LHC Appraisals will help you get the most accurate property value, so you can make profitable real estate decisions.
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