What are the parts of an appraisal?
One's home purchase
where you raise your family,
an additional vacation home or
one of many rentals, purchasing real property is
a detailed transaction that requires multiple parties to make it all happen.
||To learn more about appraising, click here to see a short video or call us today to talk about your specific property.
The majority of the parties participating are very familiar.
The real estate agent is the most familiar entity in the transaction.
Next, the mortgage company provides the financial capital required to fund the deal.
The title company ensures that all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So what party is responsible for making sure the property 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 property, where both buyer and seller are informed parties. A professional Washington licensed appraiser from Apple Capital Appraisers will ensure you as an interested party are informed.
Appraisals start with the home inspection
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection.
We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical person would expect them to be.
To ensure the stated size of the property is accurate and document the layout of the property, the inspection often requires creating a sketch of the floor plan.
Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, we use two or three approaches when determining the value of the property:
paired sales analysis and, in the case of a rental property, an income approach.
This is where we analyze information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the communities in which they appraise.
We thoroughly understand the value of certain features to the homeowners of that area.
Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home 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 add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated.
This approach to value is commonly given the most importance when an appraisal is for a real estate purchase.
If, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.
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 case, the amount of revenue the real estate yields is factored in with income produced by neighboring properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to stipulate 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 would sell for in an open market, it probably will not be the final sales price.
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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace.
At the end of the day: An appraiser from Apple Capital Appraisers will help you get the most accurate property value, so you can make wise real estate decisions.
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