What Are the Parts of an Appraisal?
Acquiring real estate is the largest transaction most of us might ever encounter. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to pull it all off.
Most of the people involved are very familiar. The real estate agent is the most familiar person in the transaction. Then, the bank provides the money necessary to bankroll the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party makes sure the real estate is worth the purchase price? In comes the appraiser. 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.
Inspecting the subject property
Our first responsibility at BK Appraisal Services is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify 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 to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of particular 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 property being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties 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. At BK Appraisal Services, we are experts when it comes to knowing the value of real estate features in Virginia Beach and Virginia Beach City County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes applied when an area has a measurable 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.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to put down 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 what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is, an appraiser from BK Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.
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