An Overview of the Appraisal ProcessBuying a home is the most serious transaction some may ever consider. It doesn't matter if it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Then, the lender provides the money necessary to bankroll the exchange. The title company ensures that all details of the exchange are completed and that a clear title passes to the buyer from the seller.
So who's responsible for making sure the real estate is consistent with the purchase price? This is where you meet the appraiser. 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 Virginia licensed appraiser from Don Hess Appraisal Services will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Next, after the inspection, we use two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we pull information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers can tell you a lot about the subdivisions in which they work. We innately 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 subject being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties 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 an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Arriving at a Value ConclusionCombining information from all approaches, the appraiser is then ready to put down 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 what a property could sell for in an open market. Depending on the specific 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 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 put the property on the market again. It all comes down to this: An appraiser from Don Hess Appraisal Services will help you discover the most accurate property value, so you can make profitable real estate decisions.