Real Property Appraisals: A PrimerBuying a house is the biggest transaction most may ever make. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the exchange. Next, the bank provides the money necessary to fund the transaction. The title company ensures that all requirements of the exchange are completed and that the title is clear to pass from the seller to the buyer.
So what party makes sure the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Accredited Appraisers, Inc. will ensure you as an interested party are informed.
Appraisals start with the inspectionTo ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for 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 the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we analyze information on local construction costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers can tell you a lot about the subdivisions in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. 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 are more accurately in line with the features of subject property.
Valuation Using the Income ApproachA third way of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate yields is factored in with income produced by similar properties to derive the current value.
Arriving at a Value ConclusionCombining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often used 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. The bottom line is: An appraiser from Accredited Appraisers, Inc. will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.