Decoding the Appraisal Process

Their home's purchase is the most serious transaction many people may ever consider. It doesn't matter if a primary residence, a second vacation home or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

The majority of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the deal. And ensuring all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, what party is responsible for making sure the real estate is worth the purchase price? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Cordoba Global Corp. will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Back at the office, we use 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

Here, we use information on local building costs, the cost of labor and other factors to derive how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • 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 valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Boca Raton and Palm Beach, Cordoba Global Corp. can't be beat. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with income produced by similar properties to derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. 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.But 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. Here's what it all boils down to, an appraiser from Cordoba Global Corp. will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.