Sunshine State Appraisers
What Is An Appraisal?
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In the simplest terms possible, an appraisal is
an "estimate of market value". An estimate of the market value of a piece
of real estate should be made by a competent professional who knows local real estate
prices and markets. The "estimate of
market value" is based upon recent sales information about similar properties, the
condition of the property, construction quality, the neighborhood's impact on future
property value and many other factors.
Once the subject has been inspected, an appraiser uses
two or three approaches to value in determining the value of real property.
- A Cost Approach
- A Sales Comparison Approach
- An Income Approach
The final step is reconciliation. By combining information from all approaches, the
appraiser is then ready to stipulate an estimated market value for the subject property.
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The Inspection
So what goes into a real estate appraisal? It all starts with the inspection. An
appraiser's duty is to inspect the property being appraised to ascertain the true status
of that property. He or she must actually see features, such as the number of bedrooms,
bathrooms, the location, and so on, to ensure that they really exist and are in the
condition a reasonable buyer would expect them to be. The inspection often includes a
sketch of the property, ensuring the proper square footage and conveying the layout of the
property. Most importantly, the appraiser looks for any obvious features - or defects -
that would affect 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: a cost approach, a sales comparison and, in the case of a
rental property, an income approach.
Cost Approach
The cost approach is the easiest to understand. The appraiser uses information on local
building costs, labor rates and other factors to determine how much it would cost to
construct a property similar to the one being appraised. This value often sets the upper
limit on what a property would sell for. Why would you pay more for an existing property
if you could spend less and build a brand new home instead? While there may be mitigating
factors, such as location and amenities, these are usually not reflected in the cost
approach.
Sales Comparison
Instead, appraisers rely on the sales comparison approach to value these types of items.
Appraisers get to know the neighborhoods in which they work. They understand the value of
certain features to the residents of that area. They know the traffic patterns, the school
zones, the busy throughways; and they use this information to determine which attributes
of a property will make a difference in the value. Then, the appraiser researches recent
sales in the vicinity and finds properties which are ''comparable'' to the subject being
appraised. The sales prices of these properties are used as a basis to begin the sales
comparison approach.
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), the appraiser adjusts the
comparable properties to more accurately portray the subject property. For example, if the
comparable property has a fireplace and the subject does not, the appraiser may deduct the
value of a fireplace from the sales price of the comparable home. If the subject property
has an extra half-bathroom and the comparable does not, the appraiser might add a certain
amount to the comparable property.
In the case of income producing properties - rental houses for example - the appraiser may
use a third approach to valuing the property. In this case, the amount of income the
property produces is used to arrive at the current value of those revenues over the
foreseeable future.
Reconciliation
Combining information from all approaches, the appraiser is then ready to stipulate an
estimated market value for the subject property. It is important to note that while this
amount is probably the best indication of what a property is worth, it may not be the
final sales price. There are always mitigating factors such as seller motivation, urgency
or ''bidding wars'' that may adjust the final price up or down. But the appraised value is
often used as a guideline for lenders who don't want to loan a buyer more money than the
property is actually worth. |
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(PHONE)
954-612-7285 PAUL ZOLDAN (FAX)
954-447-1204 |
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