Understanding the Appraisal Process

Getting a house can be the most significant investment many could ever encounter. Whether it's a primary residence, an additional vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Then, the lender provides the money necessary to finance the deal. 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.

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So, who's responsible for making sure the value of the property is consistent with the amount being paid? 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 Hertzler & Associates Real Estate Appraisers will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Hertzler & Associates Real Estate Appraisers is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present 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 illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser uses 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.

Replacement Cost

This is where the appraiser gathers information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Hertzler & Associates Real Estate Appraisers, we are an authority when it comes to knowing the value of real estate features in Williamsburg and James City County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by nearby properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. 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'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this, an appraiser from Hertzler & Associates Real Estate Appraisers will help you attain the most accurate property value, so you can make the most informed real estate decisions.