What Is an Appraisal?

Buying a house can be the most important investment many people will ever consider. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the exchange. Next, the lender provides the financial capital needed to bankroll the exchange. And the title company ensures that all requirements of the sale are completed and that a clear title passes to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the property is in line with the purchase price? 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 Fidelity Appraisal Solutions, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, we use 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

Here, the appraiser uses information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to 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 are more accurately in line with the features of subject.

  • If, for example, the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain 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 Fidelity Appraisal Solutions, Inc., we are experts when it comes to knowing the value of particular items in Port St Lucie and Saint Lucie County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Fidelity Appraisal Solutions, Inc. will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.