BUSI 422 Week 7 Appraisal Project Example

Uniform Residential Appraisal Report Summary: 2214 Hollins Mill Court

Subject and Contract

The subject is a one-story detached house at 2214 Hollins Mill Court, a composite address in a suburban subdivision in central Virginia. The owner of record is the seller. The appraisal is for a purchase transaction, for a lender considering a conventional loan, and the property rights appraised are fee simple. Brueggeman and Fisher (2016) explain that a lender relies on the appraised value, together with the price, to set the loan-to-value ratio, so the report's opinion directly affects how much the buyer can borrow. The contract price is $315,000, with no seller concessions; the appraiser reviewed the signed contract after completing the analysis below, for reasons explained in the comments.

Neighborhood

The neighborhood is a suburban area of single-family homes built mostly between 1995 and 2012, about 85 percent built up, with a predominant price range of $270,000 to $360,000. Property values have been stable over the past twelve months, demand and supply are in balance, and typical marketing time is under three months. Schools, shopping and an interstate interchange lie within three miles. No adverse influences, such as commercial traffic or industrial uses, were observed.

Site

The site is a 0.31-acre interior lot on a cul-de-sac, generally level, with public water, sewer and electricity. Zoning is single-family residential, and the present use is legal and conforming. The lot is not in a FEMA special flood hazard area. The site's size and shape are typical for the neighborhood.

Improvements

The house was built in 2008 and contains 1,850 square feet of living area above grade, with three bedrooms, two full baths, a gas fireplace and an attached two-car garage of 480 square feet. It has a crawl space foundation, vinyl siding, an architectural shingle roof about eight years old and a heat pump. Kitchen counters and flooring were updated in 2021. Using the form's rating scales, the quality is Q4, typical construction for the market, and the condition is C3, well maintained with limited updates. The effective age is estimated at 15 years.

Sales Comparison Approach

Three sales were selected from closed transactions in the same subdivision or a competing one within one mile, all sold within the past five months.

The living area adjustment of $60 a square foot was derived from pairs of sales in the subdivision that differed mainly in size. The half-bath, garage and fireplace adjustments reflect local paired sales and builder costs, discounted for depreciation. The pool adjustment reflects the limited value pools add in this market, about $8,000 against a cost several times higher. No time adjustment was made because values were stable over the period. The adjusted prices range from $308,500 to $320,200. Comparable 1 required the smallest gross adjustment and is most similar to the subject, so it receives the most weight; the indicated value by sales comparison is $313,000.

Cost Approach

Costs per square foot come from local builders' current costs for similar quality, and no functional or external obsolescence was found. Because the subject is under twenty years old, depreciation can be estimated with some confidence, but the Appraisal Institute (2020) treats market sales as the better evidence of what buyers pay, so the cost figure serves here as a check rather than the main indicator.

Reconciliation

The sales comparison approach is given the most weight because buyers in this market decide by comparing similar homes, and three close, recent sales required only modest adjustments. The cost approach, at $312,000, supports that conclusion. The income approach was not developed, since few homes in the neighborhood are rented. The final opinion of market value is $313,000 as of the effective date of the report, slightly below the contract price of $315,000.

Comments, Scope of Work and Limiting Conditions

The appraiser inspected the interior and exterior of the subject, viewed the comparables from the street and verified their sales through public records and the multiple listing service. The Appraisal Institute (2020) describes the appraiser's task as developing an independent opinion of value supported by market evidence, and this report reviewed the contract only after the analysis for that reason. Research supports the precaution: Eriksen et al. (2020) compared repeat appraisals of the same homes and found evidence that purchase appraisals cluster at or just above the contract price, consistent with knowledge of the price influencing the value. An appraisal that simply confirms the contract tells the lender nothing it did not already know. This report assumes no hidden defects, environmental hazards or title problems beyond those observed, and it is intended for use by the lender in a mortgage decision.

References

Appraisal Institute. (2020). The appraisal of real estate (15th ed.).

Brueggeman, W. B., & Fisher, J. D. (2016). Real estate finance and investments (15th ed.). McGraw-Hill Education.

Eriksen, M. D., Fout, H. B., Palim, M., & Rosenblatt, E. (2020). Contract price confirmation bias: Evidence from repeat appraisals. The Journal of Real Estate Finance and Economics, 60(1-2), 77-98. https://doi.org/10.1007/s11146-019-09716-w