Breaking Down the the Appraisal ProcessOne's home purchase can be the most significant investment some may ever encounter. It doesn't matter if it's a primary residence, a second vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the money necessary to fund the transaction. The title company makes sure that all areas of the exchange are completed and that the title is clear to pass from the seller to the buyer.
So who makes sure the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Jay Appraisals, Inc. will ensure you as an interested party are informed.
The inspection is where an appraisal startsOur first task at Jay Appraisals, Inc. is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostThis is where we pull information on local construction costs, labor rates and other elements to derive how much it would cost to build a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Sales ComparisonAppraisers become very familiar with the communities in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this case, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.
Arriving at a Value ConclusionAnalyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's market value Depending on the specific 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. 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 would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Jay Appraisals, Inc. will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.