Real Estate Appraisals: A PrimerA home purchase can be the most important financial decision many people will ever consider. It doesn't matter if it's a main residence, a second vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.
You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the bank provides the financial capital necessary to fund the exchange. The title company makes sure that all areas of the exchange are completed and that a clear title passes to the buyer from the seller.
So what party makes sure the value of the real estate is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Virginia licensed appraiser from RA Valuations will ensure you as an interested party are informed.
Appraisals start with the inspectionOur first duty at RA Valuations is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly exist and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, we gather information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the communities in which they work. We innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this case, the amount of income the property yields is factored in with income produced by similar properties to derive the current value.
Arriving at a Value ConclusionAnalyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the best indication of what a property would sell for in an open market, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. Here's what it all boils down to: An appraiser from RA Valuations will help you attain the most accurate property value, so you can make wise real estate decisions.