What Are the Components of an Appraisal?
Getting real estate can be the largest financial decision many people could ever encounter. It doesn't matter if a main residence, an additional vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
Most of the people participating are quite familiar. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to bankroll the transaction. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.
So, who makes sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from John Petz Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we look 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.
This is where we gather information on local building costs, labor rates and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Melbourne and Brevard, John Petz Appraisal is your local authority. This approach to value is usually awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with income produced by nearby properties to derive the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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. Here's what it all boils down to, an appraiser from John Petz Appraisal will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.