Home Appraisals: A Primer
Their home's purchase can be the most significant transaction some people could ever consider. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar person in the transaction. Then, the lender provides the financial capital necessary to fund the deal. And ensuring all details of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the property is worth the purchase price? This is where you meet 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 Capuano Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true 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 indeed exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local building costs, the cost of labor and other factors to derive how much it would cost to construct a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of certain 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 real estate in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.
After all differences have been accounted for, 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 experts in knowing the value of particular items in Bristow and Prince William County neighborhoods. This approach to value is most often 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 a third method of valuing a house. In this case, the amount of income the real estate generates is factored in with income produced by nearby properties to determine the current value.
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Capuano Appraisal Services, LLC will help you get the most accurate property value, so you can make the most informed real estate decisions.