What Are the Parts of an Appraisal?
Purchasing a home can be the most significant transaction some may ever make. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.
The majority of the parties involved are quite familiar. The real estate agent is the most familiar entity in the transaction. Next, the mortgage company provides the financial capital necessary to fund the deal. And ensuring all requirements of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So, who makes sure the real estate is worth the purchase price? 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 property, 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.
Inspecting the subject property
Our first duty at BK Appraisal Services is to inspect the property to determine its true status. 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 present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we use information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray 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. At BK Appraisal Services, we are an authority in knowing the value of particular items in Virginia Beach and Virginia Beach City County neighborhoods. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate yields is factored in with income produced by neighboring properties to derive the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. At the end of the day, an appraiser from BK Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.
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