The appraisal is an important part of most deals. It can be make or break related to financing. Without an appraisal that "comes in" meaning it supports the contract price, then a deal may go into a tailspin. With a deal that has an appraisal which isn't to the value of the property the options are for the buyer to bring more down payment to the deal, or the seller to bring their price down. Neither of these circumstances are the favorite way for people to respond to a deal that may fall apart, but they allow the opportunity for the sale to go through.
Some people don't think too much about the appraisal. This is both true on the buyer and the seller side. These days having a price that reflects an awareness of where a house would appraise is very important. Much as we would wish that it wasn't true, most properties that are selling are financed. So pricing appropriately is important. Also, by and large if a Realtor is savvy about values a buyer should come to the table knowing pretty much that a property will appraise.
The appraisal process is complicated in the Northern Neck. Really, what is there that is similar to the property in question? There are so many variables. Just in a "waterfront" residential property there are many many variables. There is the view, the water depth, how many feet of waterfrontage, the type of frontage in terms of an easy quick walk to the water or a steep trip that covers a lot of distance. Is there sand beach, is it marshy? Is there a pier, and if so how deep is the water? Is there a limiting depth to the entrance of the creek? So if you were an appraiser, how would you place value on these differences? If you were an appraiser who was coming from somewhere out of the area (but was approved by the appraisal management system that keeps appraisers at arms length from the mortgage companies) how would you know about many of these aspects? Would you be knowledgable about whether a creek was easy to get in and out of? Would you know a lot of key components to this property? The answer is that it may be someone who isn't local wouldn't know these things. So here we are....just at the start, we haven't even really looked at the house and we have a lot of different interpretations.
Location is important. Type of neighborhood may be important, but the basics for appraisal tend to be the square footage, age and the condition of the home...and how it would be used. Really an appraisal is an estimate of what the "average" person would pay for a property with this sort of utility value. (Once upon a time I went through the education process and passed the exam to become an appraiser. I started to work for an appraiser as a trainee which is what everyone does until they work for 2000 hours and have their work reviewed and approved and then they can go out on their own. After a couple of months my supervising appraiser said, get out of here, there is too much money to be made in real estate....and he was right, it was 2004....and so I went back to being a Realtor exclusively. Once I opened my own firm I realized that I was better off being a Realtor. Anyway, that's a total sidebar.)
An example of what the "average" person would be looking for came up recently in a discussion with a homeowner. The owner was drawing to my attention how an appraiser had failed to make special note of a second kitchen and give it any weight in the appraisal. This bothered that party. We all know of things we've done to our house that we know have real value....the question is if that value would convey to most people looking for what the house has.....the basics of living space, bedrooms, baths, nice kitchen....so they value that second kitchen? Most of them wouldn't....I didn't say that, but that is what I think happened.
When I was doing my trainee work the way I learned to approach a property was to first look for something that was architecturally similar on a waterfront or non waterfront lot. This isn't always possible in the Northern Neck, but it is a start. In other words it wasn't a good idea to be comparing a rancher with a Cape Cod since that made for a lot of differences right from the get go. Let's assume for argument purposes that you found the three ranchers to compare with your subject property....the one you've been asked to appraise. You have the waterfront property for all of these. You try to have either have a small lot, something under an acre or a larger lot. You can adjust for that acreage toward the end. What is the age of each property. What is the square footage. Number of bedrooms and baths. What is the condition, is it new construction, older and updated, needing some updating? What sort of fixtures...quality of them. Does it have a garage and if so how large and has it been completed? Basement or no? Space that isn't heated and cooled such as a screened porch? Any outbuildings? Is it in a neighborhood with amenities and if so, what is the quality of those amenities? Located close to a town? As you can see, the list can just go on and on and an appraiser is required to provide a final number based on this big collection of judgments. Not easy. And post 2008 melt-down the effort to make things more fair in the appraisal process and put distance between an appraiser and the mortgage company chagned the appraisal forms to be more uniform. By changing the forms the appraisal process is facilitated for cities and suburban areas where appraising is a much easier process of being able to find like properties. These new forms that came as a result of 2008 (and obviously the abuse of values on property which supported a very aggressive banking community), the appraisers in a country setting became saddled with filling in the blanks and then explaining what they put in the blanks because a lot of the time that was the only way to make sense of data that doesn't conform to city/suburban blanks. (I was still taking continuing education classes then, although my license was and is inactive and saw how incredibly difficult that makes the process in our type of area.)
I think that I have given considerable perspective on how difficult it is to appraise in an area like the Northern Neck. As a Realtor I look at comp solds and start with square footage, age of house, type of house, condition of house (updating or no...and when built), number of bedrooms and baths, outbuildings or garage....amount of waterfrontage, depth of waterfrontage, type of pier complex, bulkheaded or no, sand beach or no, location in relationship to town or to get to a quart of milk....these are the basics I look at. Recently I've listed a couple of properties that the owners chose to have appraisals on and I found that I was right on the mark. I'm sure I'm not always right, but there is a process and although I don't go through each and every step that an appraiser goes through, I think I get the basics right. It is helpful for my buyers. It is helpful for my sellers, and you can see why knowing your way around a given area gives real insight. As a buyer or seller you want to be informed. You really don't want to be guessing. An appraisal can help you and is significant in financing. A capable Realtor can help you greatly outside of that financing situation.