Home Appraisals: A Primer

One's home purchase is the most important financial decision many of us may ever make. It doesn't matter if it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved transaction that requires multiple parties to make it all happen.


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You're likely to be familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Next, the bank provides the money necessary to finance the exchange. Ensuring all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

So what party makes sure the value of the real estate is consistent with 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 parcel of real estate, where both buyer and seller are informed parties. A professional Florida licensed appraiser from Northwest Florida Appraisals, Inc. will ensure you as an interested party are informed.

Appraisals start with the property inspection

Our first duty at Northwest Florida Appraisals, Inc. is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property is accurate and document the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we pull information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This value commonly 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 become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as square footage, additional 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.

If, for example, 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 home.
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.

At Northwest Florida Appraisals, Inc., we are an authority when it comes to knowing the value of real estate features in Santa Rosa Beach and Walton County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value 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 typically 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 sell the property again. At the end of the day: An appraiser from Northwest Florida Appraisals, Inc. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.