What Is an Appraisal?

Their home's purchase can be the most significant financial decision some people could ever consider. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

The majority of the participants are very familiar. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the money required to finance the deal. And ensuring all areas of the exchange are completed and that a clear title passes 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 real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 JGI Valuations will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at JGI Valuations is to inspect the property to determine 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 really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we pull information on local building costs, labor rates and other factors to derive how much it would cost to build a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, 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 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.
  • 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.

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. When it comes to associating a value with features of homes in Hialeah and Miami-Dade, JGI Valuations is second to none. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the final sales price. 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 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 put the property on the market again. It all comes down to this, an appraiser from JGI Valuations will guarantee you get the most accurate property value, so you can make wise real estate decisions.