Making Sense of the Appraisal Process

Buying a home can be the biggest investment many of us may ever consider. It doesn't matter if a primary residence, a second vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

The majority of the participants are quite familiar. The most familiar face in the transaction is the real estate agent. Next, the bank provides the financial capital necessary to fund the exchange. And ensuring all aspects of the sale are completed and that a clear title passes from the seller to the purchaser 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 property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Citi Appraisal Enterprise will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at Citi Appraisal Enterprise is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, 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 use information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property similar to the one 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.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • If, for example, the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Citi Appraisal Enterprise, we are experts when it comes to knowing the worth of real estate features in Orlando and Orange County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. 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 a property's valueThere are always mitigating factors such as seller motivation, 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 the property is actually worth. At the end of the day, an appraiser from Citi Appraisal Enterprise will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.