Understanding the Appraisal Process
Their home's purchase is the most significant transaction some may ever encounter. Whether it's a primary residence, an additional vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Next, the lender provides the financial capital required to bankroll the exchange. The title company makes sure that all requirements of the exchange are completed and that the title is clear to transfer from the seller to the purchaser.
So, who makes sure the value of the real estate is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could 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 Performance Appraisals Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Performance Appraisals 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 really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Performance Appraisals Inc., we are an authority when it comes to knowing the worth of real estate features in Ponte Vedra Beach and Saint Johns County neighborhoods. This approach to value is commonly given the most consideration 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 method of valuing a property. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. It'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'. But the appraised value is often used 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 Performance Appraisals Inc. will guarantee you get the most accurate property value, so you can make wise real estate decisions.