What Goes Into an Appraisal?
Getting a house is the biggest transaction most of us will ever encounter. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Most of the participants are quite familiar. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the money needed to finance the deal. The title company ensures that all aspects of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So, who makes sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Crest Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Crest Appraisal Services is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local building costs, labor rates and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Seattle and King, Crest Appraisal Services can't be beat. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing real estate. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. At the end of the day, an appraiser from Crest Appraisal Services will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.