Making Sense of the Appraisal Process
A home purchase can be the largest investment many could ever consider. It doesn't matter if a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the transaction. Then, the bank provides the financial capital needed to fund the exchange. And ensuring all aspects of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, who makes sure the property is worth the amount being paid? 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.
Inspecting the subject property
Our first duty at Kent & Associates Appraisal is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Next, after 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.
Here, we gather 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 often sets the maximum 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 certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Kent & Associates Appraisal, we are experts when it comes to knowing the value of particular items in Mill Creek and Snohomish County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the property yields is factored in with income produced by comparable properties to give an indicator of the current value.
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used 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 Kent & Associates Appraisal will help you discover the most accurate property value, so you can make profitable real estate decisions.