What Goes Into an Appraisal?

Buying real estate is the largest financial decision most of us may ever make. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

Most of the parties involved are very familiar. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the money needed to finance the deal. And the title company sees to it that all requirements of the sale are completed and that a clear title passes from the seller to the buyer.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the property is worth the amount being paid? In comes 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 Benjamin Burkley, PLLC will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first task at Benjamin Burkley, PLLC is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser uses information on local construction costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This figure usually sets the upper limit 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 neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • But, 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. At Benjamin Burkley, PLLC, we are an authority in knowing the worth of particular items in Gainesville and Alachua County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to determine the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily 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. 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 sell the property again. At the end of the day, an appraiser from Benjamin Burkley, PLLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.