How Do Appraisers Know Your Home’s Value?
Have you ever wondered how professional home appraisers figure out how much your home is worth? Does it seem like a mystery? In this blog we de-mystify the basic approaches taken by professional home appraisers to get an accurate value of your home. We will look at the methods for appraising your property. It is important to note that appraisals include all of the land and additional buildings on the property, not just the home.
There are essentially two methods for determining how much your home is worth. The first is the “Sales Comparison” approach. This involves the appraiser comparing your property with three or four similar homes that sold in your area, using what is referred to as the “comps” or “comparables”. This analysis considers elements such as square footage of the house, the size of the lot, unfinished space, age of the house, and features such as a garage, fire place, deck, etc.
The other method is called the “Cost Approach”, used primarily to assess the value of new property. This figure is determined by evaluating the cost involved if the property needed to be replaced. The land value and depreciation of the buildings is included in the analysis. A first hand inspection of the property, land, and buildings inside and out is always a part of the valuation process. The appraiser may look at public records and MLS (Multiple Listing Service) reports to add more information to get an accurate value of the house.
Regardless of which approach is used, the home appraiser concludes their work with a report which usually includes the following items:
1. An explanation of how the house value was determined
2. A description of the house, property, surrounding area, and substantial upgrades
3. Relevant “comps” to support the assessed value
4. Documentation of serious conditions which had an impact on the value of the house
5. Exhibits in the form of sketches, pictures, or maps
6. Relevant market trends effecting the value of the house
In our last blog we talked about what to do if your house value is assessed at below the sales price. There are some things you can do to deal with this problem. At Premier Home Appraisals, in Northern Virginia, we understand that this can be a stressful time for buyers and sellers alike. Contact us to get help through the home valuation process, we will make it as smooth and easy as possible.