What Goes Into an Appraisal?
Their home's purchase can be the biggest transaction many people could ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to see it through.
Most of the participants are quite familiar. The real estate agent is the most known person in the transaction. Next, the lender provides the financial capital needed to fund the transaction. The title company makes sure that all details of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, who's responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Alliance Appraisal, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Alliance Appraisal, Inc. is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the 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, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject 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. At Alliance Appraisal, Inc., we are an authority when it comes to knowing the value of particular items in Clifton and Fairfax County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a measurable number of rental properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often 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 put the property on the market again. The bottom line is, an appraiser from Alliance Appraisal, Inc. will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.