What Are the Parts of an Appraisal?
A home purchase can be the most important transaction many of us might ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.
Most of the participants are very familiar. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the money necessary to finance the exchange. And ensuring all details of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who makes sure the property 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 property, 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.
Inspecting the subject property
Our first responsibility at Greater Orlando Appraisal Assoc., Inc. is to inspect the property to determine its true status. 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 shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, we use 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.
Here, we pull information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, 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. can't be beat. The sales comparison approach to value is most often given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. There 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 often 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 put the property on the market again. The bottom line is, an appraiser from Greater Orlando Appraisal Assoc., Inc. will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.