Understanding Appraisals

Their home's purchase is the most serious financial decision most of us may ever consider. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

Most of the parties involved are very familiar. The real estate agent is the most recognizable entity in the exchange. Then, the mortgage company provides the financial capital needed to bankroll the exchange. The title company ensures that all areas of the transaction 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, who makes sure the property is worth the amount being paid? 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 Howell Appraisal, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first responsibility at Howell Appraisal, Inc. is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical person would expect them to be. To ensure the stated square footage is accurate and document the layout of the house, the inspection often includes 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 property.

Once the site has been inspected, an appraiser uses 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.

Cost Approach

This is where we gather information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system 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 a certain amount to the comparable property.

After all differences have been accounted for, 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 associating a value with features of homes in Spotsylvania and Spotsylvania, Howell Appraisal, Inc. is your local authority. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of revenue the property generates is factored in with income produced by comparable properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. 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 case they had to sell the property again. The bottom line is, an appraiser from Howell Appraisal, Inc. will help you attain the most accurate property value, so you can make wise real estate decisions.