Making Sense of the Appraisal Process
Their home's purchase is the largest financial decision many people will ever make. Whether it's a main residence, an additional vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.
You're probably familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Next, the mortgage company provides the money needed to finance the transaction. And the title company makes sure that all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, 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.
Appraisals begin with the home inspection
Our first duty at Hertzler & Associates Real Estate Appraisers is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local building costs, the cost of labor and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers get to know the communities in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true worth of features of homes in Williamsburg and Williamsburg City, Hertzler & Associates Real Estate Appraisers can't be beat. The sales comparison approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of revenue the property generates is factored in with income produced by nearby properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value 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 the property is actually worth. Here's what it all boils down to, an appraiser from Hertzler & Associates Real Estate Appraisers will guarantee you get the most accurate property value, so you can make profitable real estate decisions.