What Are the Parts of an Appraisal?

Getting real estate is the largest investment many may ever make. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the exchange. Then, the mortgage company provides the financial capital needed to fund the exchange. And ensuring all details of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, what party makes sure the property is worth the amount being paid? This is where the appraiser comes in. 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 Holtz Appraisal Services, Inc. will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, 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

This is where we use information on local building costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.

  • If, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

After all differences have been accounted for, 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 putting a value on features of homes in Belleair and Pinellas, Holtz Appraisal Services, Inc. can't be beat. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with income produced by nearby properties to determine the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Holtz Appraisal Services, Inc. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.