![]() What Are the Parts of an Appraisal?Purchasing real estate can be the most serious financial decision many people could ever consider. It doesn't matter if a main residence, an additional vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen. Practically all the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Next, the bank provides the money necessary to bankroll the exchange. And ensuring all areas of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company. So, what party makes sure the value of the real estate is consistent with the purchase price? In comes the appraiser. 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 Space Coast Appraisal will ensure, you as an interested party, are informed. Appraisals start with the property inspectionTo determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house. After the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach. ![]() Cost ApproachThis is where the appraiser pulls information on local construction costs, the cost of labor and other elements to derive 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 predictor of value. ![]() Analyzing Comparable SalesAppraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Space Coast Appraisal, we are experts when it comes to knowing the worth of particular items in Indian Harbour Beach and Brevard County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate exchange. Valuation Using the Income ApproachA third method of valuing real estate is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate generates is factored in with income produced by neighboring properties to give an indicator of the current value. Coming Up With The Final ValueCombining 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 most reliable indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often employed 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 Space Coast Appraisal will guarantee you get the most accurate property value, so you can make wise real estate decisions. |