What Are the Parts of an Appraisal?
A home purchase is the biggest transaction some people will ever encounter. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex financial 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 familiar face in the transaction. Next, the bank provides the money required to bankroll the exchange. And the title company sees to it that all areas of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, what party makes sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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.
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 aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a reasonable person would expect them to be. To make sure the stated square footage is accurate and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. 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 match the features of subject.
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. At Greater Orlando Appraisal Assoc., Inc., we are experts when it comes to knowing the worth of particular items in Orlando and Orange County neighborhoods. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of revenue the property generates is factored in with income produced by comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 what a property is worth. Depending on the specific 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 the event they had to sell the property again. It all comes down to this, an appraiser from Greater Orlando Appraisal Assoc., Inc. will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.