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What Are the Parts of an Appraisal?

A home purchase can be the largest investment many of us could ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the money needed to finance the exchange. And the title company sees to it that all aspects 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's responsible for making sure the value of the property is in line with the purchase price? This is where you meet 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 Fmc Appraisals, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Fmc Appraisals, Inc. is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

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

Here, the appraiser analyzes information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject 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 are more accurately in line with the features of subject property.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. When it comes to putting a value on features of homes in Miami and Miami Dade, Fmc Appraisals, Inc. is second to none. This approach to value is most often given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes employed when an area has a reasonable number of renter occupied properties. In this case, the amount of income the real estate generates is factored in with income produced by nearby properties to give an indicator of the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the individual situations 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.Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Fmc Appraisals, Inc. will guarantee you get the most accurate property value, so you can make wise real estate decisions.