What Are the Components of an Appraisal?

A home purchase can be the biggest financial decision some of us will ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, 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 having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the mortgage company provides the money necessary to bankroll the deal. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller 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 value of the real estate is in line with the amount being paid? In comes 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 Warrenton Appraisal Group will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at Warrenton Appraisal Group is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly 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 convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of certain 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 in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

Say, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
But, 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.

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 Warrenton Appraisal Group, we are experts when it comes to knowing the value of real estate features in Warrenton and Fauquier County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this situation, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While the appraised value is probably the strongest indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Warrenton Appraisal Group will help you get the most accurate property value, so you can make wise real estate decisions.

Today's Rates

Mtg Loan	Rate	APR
30-yr Fixed	4.55%	4.7%
15-yr Fixed	4.01%	4.22%
1-yr Adj	2.76%	3.42%

* national averages

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