Home Appraisals: A Primer
A home purchase can be the most serious investment many may ever consider. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is an involved financial 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 most recognizable person in the transaction is the real estate agent. Then, the bank provides the money required to fund the deal. And the title company sees to it that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, who makes 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 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 Wahl Appraisal Service will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Wahl Appraisal Service 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, and so on, to ensure they really are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, we use 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.
This is where the appraiser pulls information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A valid estimate 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 associating a value with features of homes in Front Royal and Warren, Wahl Appraisal Service can't be beat. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final 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 recover in case they had to put the property on the market again. The bottom line is, an appraiser from Wahl Appraisal Service will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.