What Are the Components of an Appraisal?Purchasing a house is the most serious financial decision some people could ever encounter. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen. Most people are familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent. Then, the lender provides the financial capital required to finance the deal. And the title company ensures that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller. So, what party is responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Sunshine State Appraisal Services will ensure, you as an interested party, are informed. Appraisals begin with the inspectionTo ascertain the true status of the property, it's our duty to first conduct a thorough inspection. 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 shape a typical buyer 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 amenities - or defects - that would affect the value of the property. After the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent. Cost ApproachHere, we use information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method. Sales ComparisonAppraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
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. When it comes to valuing features of homes in Orlando and Orange, Sunshine State Appraisal Services is second to none. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home purchase. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by similar properties to give an indicator of the current value. Putting It All TogetherExamining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. Depending on the specific 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 is actually worth. Here's what it all boils down to, an appraiser from Sunshine State Appraisal Services will guarantee you get the most accurate property value, so you can make wise real estate decisions. |