What Are the Parts of an Appraisal?
Buying real estate is the largest financial decision many of us will ever make. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Then, the bank provides the financial capital necessary to bankroll the transaction. The title company makes sure that all details of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, who makes sure the value of the real estate is in line with the purchase price? This is where you meet the appraiser. 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.
The inspection is where an appraisal begins
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, 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 we use information on local building costs, the cost of labor and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, additional 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.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Seattle and King, Crest Appraisal Services is second to none. The sales comparison approach to value is usually awarded the most weight 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 a third approach to value. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always 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. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this, an appraiser from Crest Appraisal Services will help you attain the most accurate property value, so you can make wise real estate decisions.