What are the parts of an appraisal?

A home purchase can be the most important investment many of us could ever make. It doesn't matter if it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.


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You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most familiar person in the exchange. Then, the bank provides the financial capital needed to finance the exchange. The title company ensures that all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller.

So what party makes sure the real estate is consistent with the amount being paid? This is where the appraiser comes in. I 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. As a professional appraiser, certified by the Stae of Florida, I will ensure you as an interested party are informed.

Inspecting the subject property

A key duty at ECL Appraisals is to inspect the property to ascertain its true status. I must see certain aspects of the property in person to determine the number of bedrooms and bathrooms. I will note the neighborhood or market the home is in. I will personally measure the home to determine the heated area, termed gross living area. I will rate the physical cobndition of the house on a sliding scale. The inspection most often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, I identify any obvious amenities - or defects - that would have an impact on the value of the house.

Back at the office, I will determine an appropriate approach to determine the market value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent. All three approaches will be considered during reconcilation.

Replacement Cost

This is where I gather information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. When appraising single family homes I always include the cost-approach but it is rarely relied upon as the most reliable approach to valuation.

Sales Comparison

Appraisers, as a rule, become familiar with the communities in which they appraise. (In fact, geographical competency is a requirement. Thus, limiting ECL coverage areas to Hillsborough, Pinellas and Pasco counties) In this approach the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, I add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

If, for example, the comparable property has a pool and the subject doesn't, the appraiser may subtract the value of a pool from the sales price of the comparable.
However, if the subject has an extra half-bathroom and the comparable does not, I would add an amount to the comparable property.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, I then state an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property would sell for in an open market, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to: I will do my best to discover the most accurate property value, so you can make the most informed real estate decisions.