Making Sense of the Appraisal Process

Getting real estate is the biggest transaction many will ever make. It doesn't matter if a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off.

Most of the participants are very familiar. The real estate agent is the most known person in the exchange. Next, the lender provides the financial capital needed to finance the deal. And ensuring all areas of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

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So, what party is responsible for making sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Residential Valuation Service, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first duty at Residential Valuation Service, Inc. is to inspect the property to determine 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 indeed are present and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses 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.

Replacement Cost

This is where we pull information on local construction costs, labor rates and other elements to determine how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property at hand. 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 property.

For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

In the end, 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 knowing the true value of features of homes in Casselberry and Seminole, Residential Valuation Service, Inc. is your local authority. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the property generates is factored in with income produced by similar properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the best indication of what a house is worth, it may not be the price at which the property closes. 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Residential Valuation Service, Inc. will guarantee you discover the most accurate property value, so you can make wise real estate decisions.