Understanding Appraisals

A home purchase can be the most important transaction some people will ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

Practically all the people participating are very familiar. The most known person in the exchange is the real estate agent. Then, the lender provides the financial capital required to fund the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller 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 is responsible for making sure the property is worth the amount being paid? This is where the appraiser comes in. 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 Diane Beachy will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Diane Beachy is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, 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 property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect 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.

Cost Approach

This is where the appraiser uses information on local building costs, the cost of labor and other factors to figure out how much it would cost to construct a property comparable to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners 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 at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.

  • If, for example, 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.
  • 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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Diane Beachy, we are experts when it comes to knowing the worth of particular items in Springfield and Fairfax County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of 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 in question. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. 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. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Diane Beachy will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.