What are the parts of an appraisal?A home purchase can be the most important investment some people will ever consider. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the bank provides the money required to bankroll the transaction. The title company ensures that all requirements of the sale are completed and that a clear title passes from the seller to the buyer.
So what party is responsible for making sure the real estate is consistent with the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Victor G. Simmers, Cert Res RD614 will ensure you as an interested party are informed.
Inspecting the subject propertyTo determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where we use information on local construction costs, labor rates and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers get to know the subdivisions in which they work. We innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value 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.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this scenario, the amount of revenue the real estate yields is taken into consideration along with income produced by nearby properties to derive the current value.
Putting It All TogetherCombining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the best indication of what a house would sell for in an open market, it may not be the price at which the property closes. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. Regardless, the appraised value is typically employed 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. It all comes down to this: An appraiser from Victor G. Simmers, Cert Res RD614 will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.