Decoding the Appraisal Process
Purchasing a home can be the biggest financial decision many of us could ever consider. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the bank provides the money necessary to bankroll the exchange. The title company sees to it that all areas of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, what party makes sure the value of the real estate is in line with the purchase price? In comes 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 Performance Appraisals Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Performance Appraisals Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks 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: sales comparison and, in the case of a rental property, an income approach.
This is where we pull information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
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 in knowing the worth of real estate features in Ponte Vedra Beach and Saint Johns County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. 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'. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Performance Appraisals Inc. will help you discover the most accurate property value, so you can make profitable real estate decisions.