A Description of the Appraisal Process

Purchasing a home is the biggest investment most of us may ever make. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most known person in the transaction. Then, the lender provides the money necessary to fund the deal. And ensuring all details of the transaction 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, what party is responsible for making sure the property is worth 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 Balseiro & Associates will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we gather information on local building costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific 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 property at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable 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.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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. At Balseiro & Associates, we are an authority in knowing the value of particular items in Tampa and Hillsborough County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes employed when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate generates is taken into consideration along with income produced by similar properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 get back in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Balseiro & Associates will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.