What goes into an appraisal?

A home purchase can be the most serious financial decision most might ever consider. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

Most of the participants are very familiar. The real estate agent is the most familiar person in the exchange. Then, the lender provides the money necessary to fund the exchange. The title company makes sure that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.

So what party makes sure the value of 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 property, where both buyer and seller are informed parties. A professional Florida licensed appraiser from True Value Appraisal, LLC will ensure you as an interested party are informed.

Appraisals start with the property inspection

Our first task at True Value Appraisal, LLC is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Back at the office, 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 Cost

This is where we gather information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

Say, for example, the comparable property 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.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. This approach to value is most often given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of income the property produces is factored in with income produced by comparable properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. 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. 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. At the end of the day: An appraiser from True Value Appraisal, LLC will help you discover the most accurate property value, so you can make wise real estate decisions.