Making Sense of the Appraisal Process

A home purchase can be the most significant transaction many could ever encounter. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the exchange. Next, the bank provides the money necessary to fund the exchange. And ensuring all aspects of the exchange are completed and that a clear title transfers 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 makes sure the value of the real estate is consistent with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Blue Ridge Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. 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: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we gather information on local construction costs, labor rates and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Blue Ridge Appraisals, we are experts when it comes to knowing the value of particular items in White Post and Frederick County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate produces is taken into consideration along with income produced by comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest 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.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Blue Ridge Appraisals will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.