Understanding Appraisals

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

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the mortgage company provides the money needed to bankroll the transaction. 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.

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 property is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Lisa Hockman will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, 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.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser uses information on local building costs, labor rates and other factors to derive how much it would cost to build 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 method.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as square footage, extra 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 match the features of subject.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject could 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 Spotsylvania and Spotsylvania, Lisa Hockman is your local authority. The sales comparison approach to value is typically given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when an area has a reasonable number of rental properties. In this situation, the amount of income the property yields is factored in with income produced by comparable properties to give an indicator of the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. It all comes down to this, an appraiser from Lisa Hockman will guarantee you get the most accurate property value, so you can make wise real estate decisions.