What goes into an appraisal?

One's home purchase is the biggest financial decision many will ever consider. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.


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You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital necessary to finance the deal. The title company ensures that all areas of the transaction are completed and that the title is clear to transfer from the seller to the buyer.

So what party is responsible for making sure the property 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 professional Florida licensed appraiser from Gary W. Miller will ensure you as an interested party are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we pull information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject 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 more accurately portray the features of subject property.

For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
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.

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. This approach to value is most often 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 way of valuing a property. In this case, the amount of income the property generates is taken into consideration along with income produced by nearby properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the most reliable indication of what a house would sell for in an open market, it may not be the price at which the property closes. Depending on the individual 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Gary W. Miller will guarantee you get the most accurate property value, so you can make profitable real estate decisions.