Comprehending Appraisals

A home purchase can be the most serious financial decision most may ever make. It doesn't matter if where you raise your family, an additional vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the exchange. Next, the bank provides the money required to bankroll the transaction. And the title company ensures that all details of the sale are completed and that a clear title passes to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Fair Square Footage will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Fair Square Footage is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Next, after the inspection, 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.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

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 putting a value on features of homes in Ashburn and Loudoun, Fair Square Footage can't be beat. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing a property. In this situation, the amount of revenue the real estate generates is taken into consideration along with income produced by comparable properties to determine the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. Prices can always 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Fair Square Footage will guarantee you get the most accurate property value, so you can make profitable real estate decisions.