What Goes Into an Appraisal?

Purchasing real estate can be the most important financial decision most of us might ever encounter. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

The majority of the participants are quite familiar. The real estate agent is the most known entity in the transaction. Next, the lender provides the financial capital needed to fund the transaction. And ensuring all details of the transaction are completed and that a clear title passes 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, what party is responsible for making sure the real estate is worth 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 licensed, certified, professional appraiser from Kandhall Appraisal Services, LLC will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first duty at Kandhall Appraisal Services, LLC is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

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. When it comes to knowing the true value of features of homes in Fairfax and Fairfax, Kandhall Appraisal Services, LLC can't be beat. This approach to value is usually awarded the most importance 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 - we may use an additional way of valuing a property. In this situation, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Kandhall Appraisal Services, LLC will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.