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What Goes Into an Appraisal?

Acquiring a house is the biggest transaction many will ever consider. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

The majority of the participants are very familiar. The most recognizable entity in the transaction is the real estate agent. Next, the bank provides the money needed to finance the exchange. The title company makes sure that all areas of the transaction are completed and that a clear title transfers to the buyer from the seller.

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

So, who's responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Fmc Appraisals, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying 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, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to determine how much it would cost to build a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with 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 transactions in the vicinity and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath 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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Fmc Appraisals, Inc., we are an authority in knowing the value of real estate features in Miami and Miami Dade County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the property generates is factored in with income produced by similar properties to determine the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this, an appraiser from Fmc Appraisals, Inc. will help you attain the most accurate property value, so you can make the most informed real estate decisions.