A vital step in the home buying process is a professional appraisal of the Virginia Beach real estate you wish to purchase. An appraisal is an objective analysis of the property’s market value and is required by lenders to make certain that the property is worth at least as much as the amount of the loan you are requesting. Your personal approval is accomplished early in the loan process, but final commitment usually hinges on a satisfactory appraisal, and the lender will study the completed report carefully before determining whether or not the piece of real estate qualifies to serve as security for your loan.

Appraisers are experienced and knowledgeable professionals whom are licensed by the state to estimate real estate values. They must follow rules set forth in the Uniform Standards of Professional Appraisal Practice (USPAP). Once the appraiser has determined the highest and best use of the Virginia Beach real estate, i.e. the most profitable utilization of the property, he/she will then go about estimating the home’s market value through the use of three basic approaches.

The Cost Approach

The Cost Approach: a set of procedures through which a value indication is derived by estimating the current cost to construct a reproduction of the existing structure, deducting the accrued depreciation and adding the estimated land value. The principle of substitution is the basis of the cost approach, in that no rational person will pay more for a property than the amount for which he can obtain, by purchase of a site and construction of a building, with undue delay, a property of equal desirability and utility. Appraisers typically make use of published cost figures when calculating the cost to construct a building. These sources of data are available online and in printed form. Land value is determined by a comparison of the subject site with other similar sites that have recently sold.

The Sales Comparison Analysis

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