Real Estate Appraisals: A Primer
Acquiring a home is the largest transaction many of us might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Next, the lender provides the money required to bankroll the transaction. And ensuring all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. 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 Kent & Associates Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.
In the end, 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 knowing the true value of features of homes in Mill Creek and Snohomish, Kent & Associates Appraisal can't be beat. This approach to value is usually given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by neighboring 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 at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the specific circumstances 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.Regardless, 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. The bottom line is, an appraiser from Kent & Associates Appraisal will help you attain the most accurate property value, so you can make wise real estate decisions.