What Goes Into an Appraisal?

A home purchase is the biggest financial decision some may ever consider. Whether it's where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

The majority of the people participating are quite familiar. The most familiar face in the exchange is the real estate agent. Next, the lender provides the money necessary to bankroll the exchange. And ensuring all details of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, what party is responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. 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 Avelar Appraisers, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local building costs, labor rates and other factors to derive how much it would cost to construct a property comparable to the one 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.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Plantation and Broward, Avelar Appraisers, LLC can't be beat. This approach to value is usually given the most consideration 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 - the appraiser may use an additional approach to value. In this situation, the amount of income the property generates is factored in with income produced by nearby properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. 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. At the end of the day, an appraiser from Avelar Appraisers, LLC will help you get the most accurate property value, so you can make the most informed real estate decisions.