What Are the Parts of an Appraisal?
Buying a house can be the most significant financial decision some of us may ever encounter. It doesn't matter if a main residence, an additional vacation property or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the lender provides the money needed to fund the transaction. The title company makes sure that all requirements of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, what party is responsible for making sure the value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, 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.
Inspecting the subject property
Our first duty at Crest Appraisal Services is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the home, the inspection often entails creating a sketch of the floorplan. 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 analyzes information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Crest Appraisal Services, we are an authority when it comes to knowing the worth of real estate features in Seattle and King County neighborhoods. This approach to value is commonly given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Crest Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.