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The Market Valuation vs The Appraisal

posted Sep 11, 2012, 4:28 AM by Gidget Jackson   [ updated Jun 14, 2013, 3:53 AM ]

The Market Valuation vs The Appraisal


Residential Vacation Market Valuation: Location, Location, Location...of course!  It's not just being in the Keys that adds value to property, it's that quick access to both the Gulf of Mexico and Atlantic ocean for fishing, diving, island hopping and more.  Proximity to shopping, restaurants, bars, beaches, area attractions, museums and entertainment are important too.  Personal preferences such as privacy, rooms and baths, pool, views, neighborhood and amenities are most always considered.  These are things you cannot measure but create more value to a buyer if they have a lot of desirable features as folks will pay more for them.  If you add a control depth of 3' or more, open water views, sandy beach and quick access you are talking prime real estate and these tend to carry even more value and tend to sell or rent more quickly.  A Comparative Market Analysis (aka CMA) is an estimate of value of a property based on an analysis of recent sales of properties with similar characteristics.  Typically done by Realtors, this type of valuation assists sellers to establish a listing price and buyers the ability to make an offer based on properties sold in the marketplace.

Commercial Market ValuationA more statistical approach to buying that looks to return on and of investment or an upside to the purchase is a Commercial Appraisal.  These types of valuations are detailed and relate to the type of commercial property being evaluated.  Lenders require an appraisal prior to lending to determine the value of the property and affordability to repay the loan.  Below is a list of items considered in a CMA.  

Appraisal Approach: Let's face it properties in the Florida Keys are unique.  There are very few subdivisions with similar properties.  You can have a conch house next to a mansion.  Sales have been slow so comparables near the property may be sparse.  The more unique the property the further one has to go to find something similar to compare it to.  Appraisers are restricted more to statistical  valuations based on the propertiesFair Market Value (The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus).  That definition is why bank owned and distressed properties are considered in today's appraisals - they are what makes up our current market conditions. Typically sold properties within the same area in the last 90-180 days are considered first.  The appraisers opinion of value is not an exact science so using a local appraiser that knows the market is important.  An appraisal contains detailed information about the property, market and highest and best use.  Following is a list of items typically found in an appraisal.


Certified Appraisal  Market Valuation - Competitive Market Analysis (CMA)  
  • Subject Photographs & Map
  • Date of Valuation
  • Property Rights - Location
  • Legal Description
  • Owner of Record
  • Prior & Recent Sales
  • Assessed Value & Taxes
  • Neighborhood Description
  • Market Conditions
  • Zoning
  • Site Description
  • Highest & Best Use Analysis
  • Purpose of the Appraisal: typically to estimate the "As-Is" Market Value of the subject property, in fee simple title as of the day of the appraisal.
  • Scope of Work
  • Replacement Cost New
  • Income Approach
  • Sales Comparison Approach
  • Reconciliation and Final Value Conclusion
  • Personal Property
  • Exposure Time/Marketing Time
  • Certificate of Value
  • Assumptions and Limiting Conditions
  • Addenda (Tax records, property records, engagement order, qualifications of appraiser, leases if applicable, zoning descriptions)
    Cost: $300 - $5,000
  • Subject Photographs & Map
  • Date of Valuation
  • Property Rights - Location
  • Legal Description
  • Owner of Record
  • Prior & Recent Sales
  • Assessed Value & Taxes
  • Neighborhood Description
  • Market Conditions
  • Zoning
  • Site Description
  • Current Use Analysis
  • Purpose of the CMA: typically to estimate the "As-Is" Market Value of the subject property, in fee simple title as of the day of the market analysis.
  • Scope of Work (usually not defined)
  • Replacement Cost - usually not included
  • Income Approach - Profit & Loss Analysis
  • Sales Comparison Approach
  • Reconciliation and Final Value Conclusion
  • Personal Property
  • Exposure Time/Marketing Time
  • Certificate of Value: not part of a CMA.  Added value for lending but appraiser must be selected by lender.
  • Addenda  (Tax records, property records, engagement order, qualifications of appraiser, leases if applicable, zoning descriptions)
    Cost: Free


Although similar information is reported in a CMA, an appraisal is typically much more detailed and required by lenders when making a loan on the property.  A CMA is typically used by Realtors to price property for sale or assist buyers in determining value when making an offer.  The final price a buyer is willing to pay for the property and a price the seller accepts can be influenced by other factors that may or may not be considered in either case for example: motivation of the parties parties to sell (divorce, looming foreclosure, death in the family, job transfers, etc.).
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