Home Appraisals: A Primer

Acquiring a house can be the most significant transaction most could ever encounter. It doesn't matter if it's a primary residence, a seasonal vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.

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


Most of the participants are quite familiar. The real estate agent is the most recognizable person in the exchange. Next, the bank provides the money necessary to bankroll the deal. The title company sees to it that all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller.

So what party makes sure the property is consistent with the purchase price?   This is where the appraiser comes in.   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 professional Florida licensed appraiser from Ellis Appraisal Services, Inc. will ensure you as an interested party are informed.

Inspecting the subject property

Our first duty at Ellis Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, we use two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser uses information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.

  • If, for example, the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system 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.
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. This approach to value is usually given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property could sell for in an open market. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to: An appraiser from Ellis Appraisal Services, Inc. will help you discover the most accurate property value, so you can make the most informed real estate decisions.