An Overview of the Appraisal Process
Purchasing a house can be the most important transaction most of us could ever make. Whether it's a main residence, a seasonal vacation property or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the financial capital needed to fund the transaction. And ensuring all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party is responsible for making sure the property is worth the amount being paid? This is where the appraiser comes in. 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.
The inspection is where an appraisal starts
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, 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 affect the value of the property.
Back at the office, 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.
This is where we analyze information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property at hand. 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 are more accurately in line with the features of subject.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. 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 awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of income the real estate generates is factored in 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 state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 Greater Orlando Appraisal Assoc., Inc. will help you get the most fair and balanced property value, so you can make wise real estate decisions.