A Description of the Appraisal Process
A home purchase is the most important financial decision some of us will ever consider. It doesn't matter if a primary residence, an additional vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Next, the bank provides the financial capital needed to fund the deal. And ensuring all areas of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who makes sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion 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.
Inspecting the subject property
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually see 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 shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser uses 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.
This is where the appraiser analyzes information on local building costs, labor rates and other factors to derive how much it would cost to build a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
After all differences have been accounted for, 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 knowing the true value of features of homes in Orlando and Orange, Greater Orlando Appraisal Assoc., Inc. is second to none. The sales comparison approach to value is most often awarded the most weight 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 - the appraiser may use a third way of valuing a property. In this situation, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used 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. Here's what it all boils down to, an appraiser from Greater Orlando Appraisal Assoc., Inc. will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.