Understanding Appraisals

Buying real estate can be the most serious investment some people will ever make. Whether it's a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

Most of the participants are quite familiar. The most familiar person in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to finance the exchange. The title company sees to it that all areas of the exchange are completed and that a clear title passes from the seller to the buyer.

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So, who makes sure the value of the real estate is consistent with the purchase price? 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 SNB Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first task at SNB Appraisals, LLC is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Once the site has been inspected, 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.

Cost Approach

This is where the appraiser pulls information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as square footage, extra 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 are more accurately in line with the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At SNB Appraisals, LLC, we are an authority when it comes to knowing the value of real estate features in North Fort Myers and Lee County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, 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 the property is actually worth. It all comes down to this, an appraiser from SNB Appraisals, LLC will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.