Understanding Appraisals

Their home's purchase is the most serious transaction some could ever consider. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to see it through.

You're likely to be familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Next, the bank provides the money needed to bankroll the transaction. And ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller 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 in line with the amount being paid? This is where you meet 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 Landmark Appraisals & Reviews, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

Back at the office, 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.

Replacement Cost

Here, we pull information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • But, 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.

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. At Landmark Appraisals & Reviews, Inc., we are an authority when it comes to knowing the worth of particular items in Gainesville and Alachua County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Landmark Appraisals & Reviews, Inc. will help you get the most accurate property value, so you can make profitable real estate decisions.