What Are the Parts of an Appraisal?

Acquiring real estate is the most significant financial decision some might ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to see it through.

Most of the participants are very familiar. The real estate agent is the most familiar person in the transaction. Next, the lender provides the money required to fund the deal. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.

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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 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 Michael W Brubeck, P.A. will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first responsibility at Michael W Brubeck, P.A. is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on 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.

Cost Approach

This is where the appraiser uses information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This value often 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 communities in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property 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 portray the features of subject property.

For example, if 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 home.
However, 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.

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 knowing the true value of features of homes in Boca Raton and Palm Beach, Michael W Brubeck, P.A. is second to none. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this scenario, the amount of revenue the real estate yields is factored in with income produced by similar properties to give an indicator of the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 sell the property again. At the end of the day, an appraiser from Michael W Brubeck, P.A. will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.