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Decoding the Appraisal Process

Getting real estate is the biggest investment many may ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the exchange. Next, the bank provides the money required to bankroll the transaction. And ensuring all areas of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

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 value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from DANIEL I KANDEL will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at DANIEL I KANDEL is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we use information on local construction costs, the cost of labor and other elements to figure out how much it would cost to build a property comparable 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 Sales

Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home 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 adjust the comparable properties so that they more accurately match the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system 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 a certain amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At DANIEL I KANDEL, we are experts when it comes to knowing the worth of real estate features in Weston/Ft. Lauderdale and Broward County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final 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 they could get back in the event they had to put the property on the market again. At the end of the day, an appraiser from DANIEL I KANDEL will help you get the most accurate property value, so you can make the most informed real estate decisions.