What Goes Into an Appraisal?

A home purchase is the biggest financial decision most people could ever consider. It doesn't matter if a primary residence, a second vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

The majority of the parties involved are very familiar. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the financial capital required to bankroll the transaction. And ensuring all requirements of the exchange 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, who's responsible for making sure the value of the real estate 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 Ovidio Fleites will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first duty at Ovidio Fleites is to inspect the property to ascertain its true status. 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 are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, 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, the appraiser uses information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value 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 are intimately familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace 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 an amount to the comparable property.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Ovidio Fleites, we are experts in knowing the value of real estate features in Orlando and Orange County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this situation, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. 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 the property is actually worth. At the end of the day, an appraiser from Ovidio Fleites will help you discover the most fair and balanced property value, so you can make wise real estate decisions.