Understanding the Appraisal ProcessGetting real estate can be the largest investment many may ever make. Whether it's a primary residence, a second vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Practically all the parties participating are very familiar. The most known person in the exchange is the real estate agent. Then, the lender provides the financial capital needed to fund the deal. The title company sees to it that all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller.
So what party is responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. 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 professional Florida licensed appraiser from Sea Oats Appraisal will ensure you as an interested party are informed.
Appraisals start with the inspectionOur first duty at Sea Oats Appraisal is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Next, after the inspection, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostHere, we use information on local building costs, the cost of labor and other factors to calculate how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers become very familiar with the communities in which they work. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing real estate. In this scenario, the amount of income the property generates is taken into consideration along with income produced by comparable properties to determine the current value.
ReconciliationCombining information from all 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 always 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. 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 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. At the end of the day: An appraiser from Sea Oats Appraisal will help you attain the most accurate property value, so you can make wise real estate decisions.