What goes into an appraisal?

One's home purchase is the largest transaction some people might ever make. It doesn't matter if it's a main residence, a second vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple parties to see it through.


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You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Next, the bank provides the money required to finance the deal. Ensuring all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.

So who's responsible for making sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Virginia licensed appraiser from Sandra Wiley 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 features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Next, after the inspection, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser analyzes information on local construction 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 estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they work. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an 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.

Say, for example, the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. This approach to value is commonly awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the property yields is factored in with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of 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 market value It'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 typically used 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 Sandra Wiley will guarantee you get the most accurate property value, so you can make wise real estate decisions.