What Goes Into an Appraisal?
Acquiring a house is the most significant financial decision most people could ever make. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital required to finance the deal. The title company ensures that all details of the transaction are completed and that a clear title transfers from the seller to the buyer.
So, what party makes sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from BK Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser gathers information on local construction costs, labor rates and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Virginia Beach and Virginia Beach City, BK Appraisal Services can't be beat. This approach to value is most often given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this scenario, the amount of revenue the property produces is factored in with income produced by similar properties to derive the current value.
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 sell the property again. At the end of the day, an appraiser from BK Appraisal Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.
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