What is an appraisal?

Buying a home is the largest investment most people may ever encounter. It doesn't matter if it's a primary residence, a seasonal vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.


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Most of the parties participating are very familiar. The real estate agent is the most recognizable entity in the transaction. Next, the lender provides the financial capital necessary to bankroll the deal. Ensuring all requirements of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

So who's responsible for making sure the value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could 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 BLUEWATER APPRAISALS OF THE FLORIDA KEYS will ensure you as an interested party are informed.

The inspection is where an appraisal begins

Our first responsibility at BLUEWATER APPRAISALS OF THE FLORIDA KEYS is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, an appraiser employs two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to replace the property 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.

Sales Comparison

Appraisers become very familiar with the communities in which they work. We thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of 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.

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 has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

At BLUEWATER APPRAISALS OF THE FLORIDA KEYS, we are an authority when it comes to knowing the value of particular items in Key West and Monroe County neighborhoods. The sales comparison approach to value is most often given the most consideration 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 real estate. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by comparable properties to derive the current value.

Coming Up With the Final Value

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's market value 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. But the appraised value is often used 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 BLUEWATER APPRAISALS OF THE FLORIDA KEYS will guarantee you get the most accurate property value, so you can make wise real estate decisions.