What Are the Components of an Appraisal?

A home purchase can be the most significant transaction some of us will ever make. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

Practically all the participants are very familiar. The real estate agent is the most recognizable entity in the transaction. Then, the lender provides the money needed to finance the transaction. And ensuring all requirements of the transaction are completed and that a clear title transfers 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, who makes 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 might 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 Neil Jablon will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first responsibility at Neil Jablon is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Next, after the inspection, we use 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 gather information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as square footage, extra 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.

  • Say, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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. At Neil Jablon, we are an authority in knowing the worth of particular items in Boca Raton and Palm Beach County neighborhoods. This approach to value is usually given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this scenario, the amount of income the property produces is taken into consideration along with income produced by similar properties to derive the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the individual circumstances 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 they could get back in the event they had to sell the property again. The bottom line is, an appraiser from Neil Jablon will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.