Home Appraisals: A Primer
Purchasing a house is the largest financial decision some of us could ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties taking part in the transaction. The most recognizable face in the exchange is the real estate agent. Next, the mortgage company provides the money needed to finance the exchange. And the title company ensures that all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who makes sure the property is worth the purchase price? This is where you meet the appraiser. 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 Allen Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Allen Appraisal Service 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, and so on, to ensure they truly exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper 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 the property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, labor rates 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. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A true estimate 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 Washington and Washington, Allen Appraisal Service can't be beat. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the real estate generates is taken into consideration along with income produced by nearby properties to determine the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically employed 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 Allen Appraisal Service will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.