What are the components of an appraisal?

Getting a home is the most serious financial decision some might ever consider. Whether it's a primary residence, a second vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.


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Most of the people involved are very familiar. The most familiar face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital required to finance the exchange. Ensuring all requirements of the exchange are completed and that the title is clear to pass from the seller to the purchaser is the title company.

So what party makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Appraisal Source of Northwest Florida, Inc will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, 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 person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we gather information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the neighborhoods in which they work. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to knowing the true value of features of homes in Shalimar and Okaloosa, Appraisal Source of Northwest Florida, Inc is your local authority. This approach to value is commonly given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property generates is factored in with income produced by neighboring properties to give an indicator of the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. 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 what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day: An appraiser from Appraisal Source of Northwest Florida, Inc will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.