An Overview of the Appraisal Process
One's home purchase
the most important
It doesn't matter if it's
where you raise your family,
a second vacation home or
a rental fixer upper, purchasing real property is
a detailed financial transaction that requires multiple parties to pull it all off.
||To learn more about appraising, click here to see a short video or call us today to talk about your specific property.
You're probably familiar with the parties having a role in the transaction.
The real estate agent is the most recognizable face in the transaction.
Then, the lender provides the money required to fund the deal.
Ensuring all details of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So what party is responsible for making sure the property is consistent with the purchase price?
In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Elite Appraisal, Inc. will ensure you as an interested party are informed.
The inspection is where an appraisal starts
Our first task at Elite Appraisal, Inc. is to inspect the property to determine its true status.
We must see features hands on, 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 typical person would expect them to be.
The inspection often includes a sketch of the property, ensuring the square footage is proper 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.
After the inspection, we use two or three approaches when determining the value of the property:
a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise.
We thoroughly understand the value of particular features to the homeowners of that area.
Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as
fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for.
The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate purchase.
If, for example, the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value.
In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand.
Note: While the appraised value is probably the most accurate indication of what a property would sell for in an open market, it may 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace.
At the end of the day: An appraiser from Elite Appraisal, Inc. will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.