What Are the Parts of an Appraisal?

A home purchase can be the largest investment many people may ever consider. Whether it's a main residence, an additional vacation home, or an investment property, the purchase of real property is a complex transaction that requires multiple people working together to make it all happen.

Most of the parties involved are quite familiar. The most familiar face in the exchange is the real estate agent. Then, the mortgage company often provides the money necessary to fund the deal. The title company ensures all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller.

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So, what party makes sure the value of the property is consistent with the purchase price? This is where the role of the appraiser is called upon. We provide a neutral opinion of what a buyer could expect to pay — or a seller receive — for a property, where both the buyer and seller are informed parties. In these instances the most typical value appraised is market value. A licensed, certified, professional appraiser from South Florida Real Property Appraisals will ensure you are informed.

First Step- Property Inspection

To verify the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property in person and hands on, such as the number of bedrooms and bathrooms, the location, quality of construction, and condition. This is done to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a floorplan sketch. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.

After the inspection, we use up to three approaches to determining the value of the property: Sales Comparison Approach, Cost Approach, and/or the Income Approach.

Cost Approach

This is where the appraiser gathers information on local building costs, labor rates, and other factors to determine how much it would cost to construct a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for.

Sales Comparison Approach

Appraisers can tell you a lot about the subdivisions in which they work. They understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' and 'competitive' to the subject property at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, and more, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an extra bathroom that the subject doesn't, the appraiser may subtract the value of that bathroom from the sales price of the comparable.
  • However, if the subject has an extra bathroom and the comparable does not, the appraiser might add an amount to the comparable 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. When it comes to putting a value on features of homes in Miami-Dade and Broward County, South Florida Real Property Appraisals is your local authority. This approach to value is usually awarded the most weight when an appraisal is for a home exchange as it best represents the actions of buyers and sellers in the marketplace.

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 property generates is factored in with income produced by competing properties to derive the current value.

Reconciliation and Value Conclusion

After analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. 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 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 South Florida Real Property Appraisals will guarantee you discover the most accurate property value so you can make informed real estate decisions.