What Goes Into an Appraisal?

Their home's purchase can be the largest investment many of us could ever encounter. It doesn't matter if a main residence, an additional vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the exchange. Then, the mortgage company provides the financial capital necessary to bankroll the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers from the seller to the buyer 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, who makes sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Ric Lang Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Ric Lang Appraisals is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, we use 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.

Cost Approach

Here, the appraiser gathers information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject in question. 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 adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • However, 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.

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 Ric Lang Appraisals, we are experts in knowing the value of particular items in Front Royal and Warren County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this scenario, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the best indication of what a property is worth, it may not be the final sales price. Prices can always 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Ric Lang Appraisals will help you discover the most accurate property value, so you can make profitable real estate decisions.