An Overview of the Appraisal Process
Acquiring real estate can be the most significant investment many of us might ever make. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.
The majority of the participants are very familiar. The most known face in the exchange is the real estate agent. Next, the lender provides the financial capital required to fund the transaction. The title company makes sure that all areas of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.
So, what party is responsible for making sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, 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.
Appraisals begin with the home inspection
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present 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 home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Once the site has been inspected, an appraiser uses 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.
This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular 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 property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Crest Appraisal Services, we are experts when it comes to knowing the worth of real estate features in Seattle and King County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. 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 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'. But the appraised value is often employed 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. The bottom line is, an appraiser from Crest Appraisal Services will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.