Understanding AppraisalsBuying a house can be the most serious investment some people may ever consider. It doesn't matter if it's a main residence, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to pull it all off.
The majority of the participants are very familiar. The real estate agent is the most familiar person in the exchange. Then, the lender provides the financial capital necessary to fund the deal. The title company sees to it that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So what party makes sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 professional Florida licensed appraiser from First Choice Appraisal Services, Inc. will ensure you as an interested party are informed.
The inspection is where an appraisal startsOur first responsibility at First Choice Appraisal Services, Inc. is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a reasonable person would expect them to be. To ensure the stated square footage is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser analyzes information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers get to know the communities in which they appraise. We innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra 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 ApproachA third method of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the property produces is factored in with income produced by neighboring properties to determine the current value.
Putting It All TogetherExamining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. 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 could sell for in an open market. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to: An appraiser from First Choice Appraisal Services, Inc. will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.