What Are the Parts of an Appraisal?
Acquiring real estate can be the largest transaction some people will ever make. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Most of the parties participating are quite familiar. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the money necessary to finance the transaction. And the title company makes sure that all areas of the exchange are completed and that a clear title passes from the seller to the buyer.
So, what party makes sure the real estate is worth the amount being paid? 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 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 ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we gather 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 figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with 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 transactions in the area and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
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. When it comes to putting a value on features of homes in Seattle and King, Crest Appraisal Services is your local authority. The sales comparison approach to value is typically awarded the most importance 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 - the appraiser may use an additional approach to value. In this scenario, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Combining information from all applicable 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 a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often 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 sell the property 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 the most informed real estate decisions.