Home Appraisals: A Primer
Purchasing a house can be the most serious investment most people will ever encounter. Whether it's a primary residence, an additional vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
The majority of the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Then, the mortgage company provides the money necessary to fund the transaction. And ensuring all areas of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from CASA, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at CASA, Inc. is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist 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 illustrate the layout of the property, the inspection often entails 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 property.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser gathers information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood 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, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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 Miami and Miami-Dade, CASA, Inc. can't be beat. This approach to value is commonly given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the property generates is factored in with income produced by similar 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 put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, 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. At the end of the day, an appraiser from CASA, Inc. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.