An Overview of the Appraisal Process

Acquiring real estate can be the most important financial decision most might ever encounter. Whether it's a main residence, a second vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the bank provides the financial capital required to finance the deal. And ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.

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

So, what party makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Citi Appraisal Enterprise will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Citi Appraisal Enterprise is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

After the inspection, we use 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.

Cost Approach

This is where the appraiser pulls information on local building costs, the cost of labor and other elements to ascertain how much it would cost to build a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

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 subject being appraised. 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 more accurately portray the features of subject.

  • For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Citi Appraisal Enterprise, we are an authority when it comes to knowing the value of particular items in Orlando and Orange County neighborhoods. This approach to value is typically given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending 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 often 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 Citi Appraisal Enterprise will guarantee you get the most accurate property value, so you can make profitable real estate decisions.