What Goes Into an Appraisal?
Buying real estate is the most serious financial decision most people will ever make. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The most recognizable entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the transaction. And ensuring all areas of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 licensed, certified, professional appraiser from Acanda Appraisal Co. will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
To ascertain the true status of the property, it's our duty to first perform 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 exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser gathers information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Acanda Appraisal Co., we are an authority in knowing the value of real estate features in Miramar and Broward County neighborhoods. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Acanda Appraisal Co. will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.