Understanding Appraisals

Their home's purchase is the most serious investment many of us could ever encounter. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Then, the mortgage company provides the money necessary to bankroll the deal. And ensuring all aspects of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.

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So, who makes sure the property is worth the amount being paid? This is where the appraiser comes in. 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 Appraisal Inc. (360) 903-2538 will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first responsibility at Appraisal Inc. (360) 903-2538 is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really 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 accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

After the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser pulls information on local building costs, labor rates and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • For example, if the comparable property 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.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable 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 associating a value with features of homes in RIDGEFIELD and Clark, Appraisal Inc. (360) 903-2538 can't be beat. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all applicable 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 accurate indication of what a house is worth, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used 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. At the end of the day, an appraiser from Appraisal Inc. (360) 903-2538 will help you get the most accurate property value, so you can make the most informed real estate decisions.