Real Property Appraisals: A Primer
A home purchase is the largest investment some may ever encounter. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to fund the exchange. And the title company ensures that all requirements of the sale are completed and that a clear title passes to the buyer from the seller.
So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? 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 licensed, certified, professional appraiser from ValPro Appraisal LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local construction costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate in question. 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 more accurately match the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Cape Coral and Lee, ValPro Appraisal LLC is second to none. This approach to value is usually awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 sell the property again. The bottom line is, an appraiser from ValPro Appraisal LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.