Understanding the Appraisal Process
Purchasing a house is the biggest financial decision some will ever encounter. Whether it's a primary residence, a second vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the bank provides the financial capital required to bankroll the deal. The title company ensures that all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, who's responsible for making sure the value of the property is consistent with the purchase price? In comes 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 licensed, certified, professional appraiser from Capuano Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really 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, we identify any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise. They 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 home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
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 Capuano Appraisal Services, LLC, we are an authority when it comes to knowing the worth of real estate features in Bristow and Prince William County neighborhoods. The sales comparison approach to value is typically given the most weight 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 method of valuing a house. In this scenario, the amount of revenue the property yields is factored in with income produced by comparable properties to derive the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. 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. Regardless, 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 put the property on the market again. At the end of the day, an appraiser from Capuano Appraisal Services, LLC will help you attain the most accurate property value, so you can make wise real estate decisions.