What Goes Into an Appraisal?
Getting real estate can be the largest transaction some people may ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to see it through.
Most of the participants are very familiar. The real estate agent is the most known face in the exchange. Next, the lender provides the money required to bankroll the transaction. And the title company ensures that all requirements of the exchange are completed and that a clear title passes to the buyer from the seller.
So, who makes sure the real estate 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 Hertzler & Associates Real Estate Appraisers will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Hertzler & Associates Real Estate Appraisers is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local construction costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Hertzler & Associates Real Estate Appraisers, we are an authority when it comes to knowing the value of real estate features in Williamsburg and Williamsburg City County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of 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 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. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. The bottom line is, an appraiser from Hertzler & Associates Real Estate Appraisers will help you attain the most accurate property value, so you can make the most informed real estate decisions.