What Is an Appraisal?

Their home's purchase can be the largest financial decision most of us might ever make. Whether it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.

You're likely to be familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the exchange. And ensuring all areas of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the real estate is in line 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 Appraisal House, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Appraisal House, Inc. is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local construction costs, labor rates and other factors to determine how much it would cost to build a property similar to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject.

For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Appraisal House, Inc., we are an authority in knowing the value of real estate features in Destin and Okaloosa County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Analyzing the data 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 necessarily the final sales price even though it is likely the best indication of what a property is worth. 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 often employed 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. At the end of the day, an appraiser from Appraisal House, Inc. will help you discover the most accurate property value, so you can make wise real estate decisions.