What is an appraisal?A home purchase can be the most serious investment most of us may ever encounter. Whether it's a main residence, an additional vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.
Most of the people participating are quite familiar. The real estate agent is the most familiar face in the transaction. Next, the lender provides the financial capital required to finance the transaction. Ensuring all requirements of the exchange are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So what party makes sure 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 parcel of real estate, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Classic Valuations, Inc. will ensure you as an interested party are informed.
The inspection is where an appraisal startsOur first task at Classic Valuations, Inc. is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate 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.
Back at the office, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachThis is where the appraiser analyzes information on local construction costs, labor rates and other elements to figure out how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
Valuation Using the Income ApproachA third method of valuing approach to value is sometimes applied when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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 could sell for in an open market. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. Here's what it all boils down to: An appraiser from Classic Valuations, Inc. will guarantee you get the most accurate property value, so you can make profitable real estate decisions.