Making Sense of the Appraisal Process
Purchasing a home is the most serious transaction most could ever consider. Whether it's a primary residence, a second vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to see it through.
Most of the participants are quite familiar. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the exchange. The title company sees to it that all details of the exchange are completed and that a clear title transfers from the seller to the buyer.
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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Equity Appraisers will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist 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 entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
Once all necessary adjustments have been made, 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 valuing features of homes in West Palm Beach and Palm Beach, Equity Appraisers can't be beat. The sales comparison approach to value is commonly awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to derive the current value.
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically employed 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 sell the property again. The bottom line is, an appraiser from Equity Appraisers will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.