What Are the Components of an Appraisal?
A home purchase is the biggest investment most of us could ever make. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
Practically all the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the bank provides the money necessary to finance the exchange. And ensuring all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 licensed, certified, professional appraiser from BK Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
Our first task at BK Appraisal Services is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.
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.
Here, we use information on local construction costs, the cost of labor 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 maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities 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 close proximity to the subject and finds properties which are 'comparable' to the subject in question. 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.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Virginia Beach and Virginia Beach City, BK Appraisal Services can't be beat. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Analyzing 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 at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valuePrices 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this, an appraiser from BK Appraisal Services will help you discover the most accurate property value, so you can make wise real estate decisions.
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