Breaking Down the AppraisalsAcquiring real estate can be the most significant investment many may ever consider. It doesn't matter if it's a primary residence, an additional vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.
The majority of the parties involved are quite familiar. The real estate agent is the most known person in the exchange. Then, the mortgage company provides the money necessary to fund the deal. The title company makes sure that all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So what party makes sure the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 Virginia licensed appraiser from Appraisal Networks of Virginia will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, 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 ApproachThis is where the appraiser pulls information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers get to know the neighborhoods in which they work. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachA third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is factored in with income produced by similar properties to give an indicator of the current value.
Coming Up With the Final ValueCombining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: 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 specific circumstances 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 typically used 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. The bottom line is: An appraiser from Appraisal Networks of Virginia will help you discover the most fair and balanced property value, so you can make wise real estate decisions.