What Goes Into an Appraisal?

Buying a home is the most serious transaction some of us will ever consider. Whether it's a primary residence, an additional vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.

The majority of the people involved are very familiar. The real estate agent is the most familiar person in the exchange. Then, the mortgage company provides the financial capital necessary to fund the exchange. And ensuring all areas of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Treasure Coast Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at Treasure Coast Appraisals is to inspect the property to determine its true status. 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 present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser uses information on local building costs, the cost of labor and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the communities in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, 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 putting a value on features of homes in Port St Lucie and Saint Lucie, Treasure Coast Appraisals is second to none. This approach to value is commonly given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. The bottom line is, an appraiser from Treasure Coast Appraisals will help you get the most accurate property value, so you can make the most informed real estate decisions.

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