Purchasing a house can be the most important investment many of us may ever encounter. It doesn't matter if a main residence, a second vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most of the participants are very familiar. The most known face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital necessary to fund the exchange. And the title company makes sure that all requirements of the sale are completed and that the title is clear to pass from the seller to the buyer.
So, who's responsible for making sure the value of the property is in line with 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 Forte Appraisal Service, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first responsibility at Forte Appraisal Service, Inc. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after 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, the appraiser pulls information on local building costs, labor rates and other elements to determine how much it would cost to construct a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of particular 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 being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray 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. At Forte Appraisal Service, Inc., we are an authority when it comes to knowing the value of particular items in and Loudoun County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a real estate purchase.
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 case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the best 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 the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final 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 the property is actually worth. Here's what it all boils down to, an appraiser from Forte Appraisal Service, Inc. will help you discover the most accurate property value, so you can make profitable real estate decisions.