Real Estate Appraisals: A Primer
A home purchase can be the largest transaction most might ever encounter. It doesn't matter if a primary residence, a second vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the financial capital needed to finance the transaction. And ensuring all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, who makes sure the value of the real estate is consistent 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 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.
Inspecting the subject property
Our first responsibility at DANIEL I KANDEL is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks 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 real property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions 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 upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A true 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 putting a value on features of homes in Weston/Ft. Lauderdale and Broward, DANIEL I KANDEL is your local authority. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is factored in with income produced by neighboring properties to determine the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from DANIEL I KANDEL will help you discover the most accurate property value, so you can make profitable real estate decisions.