What is an appraisal?

A home purchase is the most important financial decision most people might ever encounter. It doesn't matter if it's a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

Practically all the parties involved are very familiar. The most familiar face in the transaction is the real estate agent. Next, the bank provides the financial capital needed to finance the exchange. The title company makes sure that all aspects of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

So what party makes sure the property is consistent with the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A professional Virginia licensed appraiser from Jeremiah Real Estate Appraisals will ensure you as an interested party are informed.

Appraisals begin with the inspection

To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser gathers information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the communities in which they work. We innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. 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 adjust the comparable properties so that they more accurately portray the features of subject.

Say, for example, the comparable property has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
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 valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. This approach to value is commonly awarded the most importance when an appraisal is for a real estate exchange.

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 revenue the real estate produces is taken into consideration along with income produced by comparable properties to determine the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a house would sell for in an open market, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Jeremiah Real Estate Appraisals will help you get the most accurate property value, so you can make profitable real estate decisions.