What Are the Components of an Appraisal?
Purchasing a home can be the largest investment many will ever consider. It doesn't matter if where you raise your family, an additional vacation home or an investment, purchasing real property is an involved transaction that requires multiple parties to see it through.
The majority of the participants are quite familiar. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to finance the exchange. And ensuring all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who makes sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. 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 Crest Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at Crest Appraisal Services is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. 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.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Seattle and King, Crest Appraisal Services can't be beat. This approach to value is commonly given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueIt'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'. Regardless, the appraised value is often 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 put the property on the market again. At the end of the day, an appraiser from Crest Appraisal Services will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.