Comprehending Appraisals

Their home's purchase is the biggest financial decision most will ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The most familiar person in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to finance the exchange. The title company ensures that all details of the transaction are completed and that the title is clear to pass to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the property is worth the amount being paid? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Select Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first duty at Select Appraisals, LLC is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser uses information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, 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 property.

  • For example, if the comparable property has a fireplace and the subject does not, 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Select Appraisals, LLC, we are an authority when it comes to knowing the worth of real estate features in Virginia Beach and Virginia Beach City County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending 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.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 put the property on the market again. Here's what it all boils down to, an appraiser from Select Appraisals, LLC will help you attain the most accurate property value, so you can make profitable real estate decisions.