Breaking Down the AppraisalsOne's home purchase can be the largest transaction some people may ever make. Whether it's a primary residence, an additional vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Next, the bank provides the financial capital necessary to finance the deal. The title company sees to it that all details of the exchange are completed and that the title is clear to transfer from the seller to the buyer.
So who makes sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. 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 professional Florida licensed appraiser from Heights Appraisals, Inc. will ensure you as an interested party are informed.
Appraisals start with the inspectionTo determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly 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 correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, 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 the appraiser analyzes information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable SalesAppraisers become very familiar with the subdivisions in which they work. We innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home 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 property.
Valuation Using the Income ApproachIn 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 produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
ReconciliationAnalyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's value 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. 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 Heights Appraisals, Inc. will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.