Real Estate Appraisals: A Primer
A home purchase can be the most significant financial decision most will ever encounter. It doesn't matter if where you raise your family, a second vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
The majority of the participants are quite familiar. The real estate agent is the most known person in the exchange. Then, the bank provides the financial capital needed to finance the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property 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 licensed, certified, professional appraiser from Performance Appraisals Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser analyzes information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct 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.
Appraisers get to know the communities in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, extra 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.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Ponte Vedra Beach and Saint Johns, Performance Appraisals Inc. can't be beat. This approach to value is most often awarded the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this situation, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the final sales price. Depending on the specific situations 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 used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Performance Appraisals Inc. will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.