What Are the Components of an Appraisal?

Acquiring a house can be the most serious financial decision most people might ever encounter. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the money required to bankroll the deal. The title company sees to it that all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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So, who's responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 Citi Appraisal Enterprise will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To determine the true status of the property, it's our duty to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

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

Once all necessary adjustments have been made, 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 knowing the true value of features of homes in Orlando and Orange, Citi Appraisal Enterprise is second to none. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of income the property generates is taken into consideration along with income produced by nearby properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Citi Appraisal Enterprise will help you get the most fair and balanced property value, so you can make wise real estate decisions.