Making Sense of the Appraisal Process
A home purchase is the most significant financial decision most of us might ever make. It doesn't matter if a main residence, a second vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most known face in the exchange. Then, the bank provides the financial capital necessary to fund the transaction. And ensuring all details of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who makes sure the property is worth the purchase price? This is where you meet 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 Greater Orlando Appraisal Assoc., Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Greater Orlando Appraisal Assoc., Inc. is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a reasonable person would expect them to be. To ensure the stated square footage is accurate and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of 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.
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. When it comes to putting a value on features of homes in Orlando and Orange, Greater Orlando Appraisal Assoc., Inc. can't be beat. This approach to value is typically awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to document 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 a property's valueIt'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 case they had to put the property on the market again. It all comes down to this, an appraiser from Greater Orlando Appraisal Assoc., Inc. will help you attain the most accurate property value, so you can make profitable real estate decisions.