Appraisal Information


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So, who makes sure the property is worth 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. Practically all the parties involved are quite familiar. The most known person in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to finance the deal. And the title company sees to it that all requirements of the exchange are completed and that a clear title passes from the seller to the purchaser.

Appraiser Ja​rg​on

Have you heard an appraiser use any of these terms? Did you just hear one of our appraisers use it and you came here to figure out what it meant? We don't mean to speak a foreign language, but any profession has its jargon. What res ipsa loquitur is to a lawyer and triple witching is to day traders, external obsolescence is to appraisers. On this page, we'll give some examples of common appraiser jargon and their meanings.

Adjustment. When comparable properties have been identified, the appraiser makes adjustments to the Sales Price of each of the comparables to bring them into equivalency with the subject property, accounting for differences in location, construction quality, living area, acreage, frontage, amenities and the like. This is where the professional expertise of an appraiser is most valuable.

Chattel. Personal property that may be on the subject property but which does not figure into the opinion of value in the appraisal report.

Comparable or "comp". Properties like the subject property nearby which have sold recently, used as a basis to determine the fair market value of the subject property.

Drive-by. An appraisal that is limited to an exterior-only examination of the Subject to make a determination that the property is actually there and has no obvious defects or damage visible from the outside. Fannie Mae's form for this type of appraisal is its 2055, so you may hear a drive-by referred to as a "2055."

Fair market value. The appraiser's opinion of value as written in his or her appraisal report should reflect the fair market value of the property -- what a willing buyer would pay a willing seller in an arm's-length transaction.

GLA. "Gross Living Area," the sum of all above grade floor space, including stairways and closet space. GLA is often determined using exterior wall measurements.

Latent defects. A defect on the property that is not readily apparent but which impact the fair market value. Structural damage or termite infestation might be examples.

MLS. A Multiple Listing Service is a proprietary listing of all properties on the market in a given area and their listing prices, as well as a record of all recent closed sales and their sales prices. Created by and used primary by real estate agents, many appraisers pay for access to these databases to aid in comparable selection and adjustment research.

Obsolescence. The value of assets diminishes as their capabilities degrade or more desirable alternatives are developed. Functional obsolescence is the presence or absence of a feature which renders the property undesirable. Obsolescence can also occur because the surrounding area changes, making a feature of the property less desirable.

Subject. Short for the property being appraised -- the "subject property."

Useful life. The time during which a property can provide benefits to its owner.

URAR. Short for Uniform Residential Appraisal Report, Fannie Mae form 1004, it is the form most lenders require if they need a full appraisal (that is, with walk-through inspection).

USPAP. Short for Uniform Standards of Professional Appraisal Practice, USPAP promotes standards and professionalism in appraisal practice, and is often enacted into law in a state. It is promulgated by the Appraisal Foundation, a non-governmental entity chartered by Congress to, among other things, maintain appraisal standards.

Walk-through. An inspection that includes a visit to each part of the interior of the house used in estimating value

SEE "FREQUENLY ASKED QUESTIONS"           

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

SEE "
HOW TO PREPARE"

Back at the office, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we pull information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property 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. 

Paired Sales Analysis

Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 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. 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. 
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. Appraisal Valuation Firm, LLC is a specialist in knowing the value of real estate features in South Florida neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

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

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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. At the end of the day, an appraiser from Appraisal Valuation Firm, LLC will help you attain the most accurate property value, so you can make the most informed real estate decisions.

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