What Are the Components of an Appraisal?
Getting real estate is the most important investment some people might ever encounter. Whether it's a main residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the lender provides the financial capital needed to fund the transaction. And the title company ensures that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.
So, what party is responsible for making sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 DANIEL I KANDEL will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first task at DANIEL I KANDEL is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the home, 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, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we pull information on local building costs, labor rates and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate 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 can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions 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, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject 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 knowing the true worth of features of homes in Weston/Ft. Lauderdale and Broward, DANIEL I KANDEL is second to none. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.
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 case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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. 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. Here's what it all boils down to, an appraiser from DANIEL I KANDEL will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.