Decoding the Appraisal Process

Their home's purchase can be the biggest financial decision most people may ever consider. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to see it through.

You're likely to be familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the lender provides the money needed to bankroll the transaction. The title company makes sure that all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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So, who makes sure the real estate is worth the amount being paid? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Win-Tech Forms will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Win-Tech Forms is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Back at the office, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local construction costs, the cost of labor and other elements to calculate 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. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

Once all necessary adjustments have been made, 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 valuing features of homes in Davie and Broward, Win-Tech Forms can't be beat. The sales comparison approach to value is typically awarded the most importance 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 situation, the amount of income the property generates is factored in with income produced by comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing 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 they could recover in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Win-Tech Forms will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.