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Real Property Appraisals: A Primer

Their home's purchase can be the largest transaction most will ever consider. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Most of the participants are quite familiar. The most familiar face in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to finance the deal. And the title company ensures that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

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

So, who makes sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 ASAP Appraisal Group will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct 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.

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

Cost Approach

Here, we analyze information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents 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 remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray the features of subject.

  • If, for example, the comparable property has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A valid 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 ASAP Appraisal Group, we are experts in knowing the value of particular items in Lakeland and Polk County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. 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. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from ASAP Appraisal Group will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.