Chapter 1
Virginia Real Estate Law & Agency
Course: Virginia Real Estate Exam Prep
Subject: Virginia State Salesperson Exam Prep
Chapter: Real Estate Finance
The Appraisal Process:A licensed or certified appraiser provides an unbiased opinion of market value for the lender.
- Inspection: The appraiser visits the property, measures, and notes its condition, features, and any issues.
- Market Analysis: They research recent sales (usually within the last 6 months, within 1 mile, and of similar size/age/style) of at least three comparable properties ("comps").
- Adjustments: The appraiser adjusts the sale price of each comp up or down to account for differences with the subject property (e.g., +10,000 for a smaller lot).
- Reconciliation: The appraiser reconciles the adjusted values of the comps to arrive at a final opinion of value for the subject property.
Principles of Value in Action:
- Highest and Best Use (HABU): The legally permitted, physically possible, financially feasible, and maximally productive use of the land. A single-family home on a commercially zoned corner in a busy area may not be its HABU.
- Substitution: A buyer will not pay more for a property than the cost of acquiring a similar, desirable substitute property. This principle is the foundation of the sales comparison approach.
- Conformity: Maximum value is achieved when a property conforms to its surroundings. A mansion in a neighborhood of modest homes suffers from over-improvement.