What Are the Parts of an Appraisal?
Their home's purchase is the biggest investment many people might ever consider. It doesn't matter if a main residence, a second vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Next, the bank provides the money required to fund the transaction. And ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent 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 Performance Appraisals Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Performance Appraisals Inc. is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local construction costs, labor rates and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.
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. At Performance Appraisals Inc., we are an authority when it comes to knowing the worth of particular items in Ponte Vedra Beach and Saint Johns County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of revenue the real estate produces is factored in with income produced by nearby properties to derive the current value.
The Bottom Line
Combining information from all applicable 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 what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. At the end of the day, an appraiser from Performance Appraisals Inc. will guarantee you get the most accurate property value, so you can make wise real estate decisions.