What Are the Components of an Appraisal?
Purchasing a house is the most significant investment many people could ever encounter. It doesn't matter if a primary residence, a second vacation home or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known person in the transaction. Next, the lender provides the money required to bankroll the exchange. And ensuring all details of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 Kent & Associates Appraisal will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first task at Kent & Associates Appraisal is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist 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 correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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 valuing features of homes in Mill Creek and Snohomish, Kent & Associates Appraisal is second to none. This approach to value is usually awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of rental properties. In this scenario, the amount of income the property yields is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Kent & Associates Appraisal will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.