Decoding the Appraisal Process
Their home's purchase is the most important investment most of us may ever make. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.
The majority of the participants are very familiar. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all details of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Greater Orlando Appraisal Assoc., Inc. will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the communities in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Orlando and Orange, Greater Orlando Appraisal Assoc., Inc. is second to none. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a property is worth, it may not be the final sales price. Depending on the individual circumstances 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Greater Orlando Appraisal Assoc., Inc. will help you get the most fair and balanced property value, so you can make wise real estate decisions.