Do you ever wonder about the value shown on your appraisal report? Do you ever wonder if the appraiser simply "hit the number" on the sales contract? How does the appraiser come up with a value anyway? The appraiser's guiding rules are called "USPAP", the Uniform Standards of Professional Appraisal Practice. It is the mandatory set of rules that direct the appraiser to perform in an ethical and unbiased manner. If you'd like to read USPAP, get a pot of coffee and then Click Here.

In most cases, a real estate appraiser is requested to form an opinion of market value for a particular property.

Basically, market value is a price agreed upon by both buyer and seller. Regardless if an appraisal is for a refinance, a sale, or another use where market value is needed, the process is the same and most often times relies on comparing your home, the subject property, to recent sales of similar homes. With newer homes, we may consider the cost to build a similar home on a similar lot as an additional method to estimate market value. If the home is a rental, we may consider developing a value based on the rents received.

No two houses are the same. Even in cookie cutter subdivisions of one or two floor plans, each house has different upgrades, is in different condition, has different views, and other variables. Joe-Bob Smith has a new roof. Sue Ellen Johnson just upgraded to a gourmet kitchen. And of course, every neighborhood has 'those people' and don't we all feel sorry for the folks next door to that dump! All of these things influence value: Assuming each of these houses was for sale, buyers will likely pay more for the upgrades and less for problems, even when the houses are the same size and age.

Will every buyer be willing to pay the exact same amount for that gourmet kitchen? If take-out pizza is your idea of gourmet, then you probably won't spend any extra for those fancy appliances and granite counters. Yet if instead you really love to cook but don't want the hassles of remodeling an average kitchen, you probably would be willing to pay more for the house that's already been upgraded. So what is a 'typical' buyer and what is the 'typical' value for these things?

Based on our experience and analysis of sales of homes, we have derived values of different features, conditions, qualities, locations, and other factors that impact value. These values are the dollar adjustments you see on your appraisal report. If a sales comparable (comp) has a superior feature to your home, we deduct the value of that feature. If it is inferior, we add value. At the end of this analysis, we have adjusted sales prices, which are usually in a narrow range of values. If one sale is more representative of the subject, the value moves towards that sale, but still considers the other comps. As noted earlier, sometimes we will look at the cost to build a home similar to the subject, and sometimes look at the income potential if the house were rented.

It is tempting to look at a sales price or the refinance amount of a home and appraise it to that value. And unfortunately, some appraisers (hopefully only a small percentage) fall for this easy but very wrong method. If the appraiser is not familiar with the area, there is more opportunity for errors based on a lack of knowledge of local conditions. Always ask where the appraiser is from, and how much experience he has in your area.

At Blue Ridge Valuation, we do not appraise to 'hit the number', and we keep our area of coverage reasonable. We know what is happening in a community and how that may impact the results of an appraisal. Even though it is more difficult, we appraise to what the market forces indicate value is, and sometimes the results you get may not be what you expected. That's hard, because no one is happy then. The buyer isn't happy, the seller isn't happy, the realtor isn't happy, and the lender isn't happy, and we are the ones that are called to explain. That usually is not a happy experience for us either. But it is our job to provide that unbiased opinion, no matter what.

We know this area. Our appraisers, Alan and Ron, have over forty years combined experience appraising real estate in the Buncombe, Henderson, Haywood and Madison County area. You can trust Blue Ridge Valuation Group to provide an appraisal that you can trust!

© 2010 Blue Ridge Valuation Group, LLC

 

Our Appraisers

Byron (Ron) Dame, Jr.  Profile
Alan Driskell  Profile
 

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