Understanding Appraisals

Their home's purchase can be the largest transaction some people could ever encounter. Whether it's a main residence, a second vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off.

The majority of the participants are quite familiar. The real estate agent is the most recognizable face in the exchange. Then, the bank provides the money needed to finance the transaction. And the title company sees to it that all areas of the sale are completed and that the title is clear to transfer from the seller to the buyer.

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 real estate is consistent with the purchase price? This is where you meet the appraiser. 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. A licensed, certified, professional appraiser from Wilber Dávila Appraisal & Consultant PSC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Wilber Dávila Appraisal & Consultant PSC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Next, after the inspection, 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.

Cost Approach

Here, the appraiser pulls information on local building costs, labor rates and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • Say, for example, the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Vega Alta and Vega Alta, Wilber Dávila Appraisal & Consultant PSC is second to none. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing real estate. In this case, the amount of revenue the property generates is taken into consideration along with income produced by nearby properties to determine the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 recover in case they had to sell the property again. At the end of the day, an appraiser from Wilber Dávila Appraisal & Consultant PSC will help you get the most accurate property value, so you can make wise real estate decisions.