Decoding the Appraisal Process
Buying a house can be the most serious financial decision many might ever make. It doesn't matter if a primary residence, a second vacation home or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.
Most of the parties involved are very familiar. The most known entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to fund the exchange. And the title company makes sure that all details of the transaction are completed and that the title is clear to transfer from the seller to the buyer.
So, what party makes sure the value of the property is in line with the amount being paid? 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 DANIEL I KANDEL will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first duty at DANIEL I KANDEL is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - 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 the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, the cost of labor and other factors to determine how much it would cost to build a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject.
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. When it comes to associating a value with features of homes in Weston/Ft. Lauderdale and Broward, DANIEL I KANDEL is your local authority. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine 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 in question. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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. The bottom line is, an appraiser from DANIEL I KANDEL will help you discover the most accurate property value, so you can make profitable real estate decisions.