An Overview of the Appraisal Process

A home purchase can be the most significant transaction many people might ever make. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the transaction. Next, the mortgage company provides the money necessary to finance the deal. The title company makes sure that all areas of the transaction are completed and that a clear title transfers from the seller to the purchaser.

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 value of the real estate is consistent with the amount being paid? This is where you meet 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 ATL Fore Life, LLC will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first duty at ATL Fore Life, LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser uses information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable property 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.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At ATL Fore Life, LLC, we are an authority in knowing the worth of real estate features in Lynchburg and Lynchburg City County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes used when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will 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 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 ATL Fore Life, LLC will help you attain the most accurate property value, so you can make wise real estate decisions.