What Are the Parts of an Appraisal?
Getting a house can be the biggest investment many will ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.
The majority of the parties involved are quite familiar. The most familiar entity in the exchange is the real estate agent. Then, the lender provides the money required to bankroll the exchange. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the purchase price? 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 Capuano Appraisal Services, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our responsibility to first complete 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 indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Next, after the inspection, 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.
Here, the appraiser analyzes information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the subdivisions in which they work. They innately 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 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 more accurately portray the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Capuano Appraisal Services, LLC, we are an authority when it comes to knowing the value of particular items in Bristow and Prince William County neighborhoods. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home 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 situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. It all comes down to this, an appraiser from Capuano Appraisal Services, LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.