What Goes Into an Appraisal?

A home purchase is the most significant investment many people could ever encounter. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.

Most of the parties involved are quite familiar. The real estate agent is the most recognizable entity in the exchange. Then, the lender provides the money necessary to fund the deal. And ensuring all details of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, who makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Action Appraisal of Florida will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at Action Appraisal of Florida 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 indeed are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we pull information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

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

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Ocala and Marion, Action Appraisal of Florida is your local authority. This approach to value is most often given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by neighboring properties to derive the current value.

Reconciliation

Combining information 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 at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending 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.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. Here's what it all boils down to, an appraiser from Action Appraisal of Florida will help you get the most fair and balanced property value, so you can make profitable real estate decisions.