Real Property Appraisals: A Primer
Buying real estate can be the largest financial decision some people might ever encounter. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off.
The majority of the people involved are quite familiar. The most familiar person in the transaction is the real estate agent. Next, the mortgage company provides the financial capital needed to fund the transaction. And ensuring all details of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Everyday Appraisal will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first duty at Everyday Appraisal is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, 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, we identify any obvious features - 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 sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser pulls information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the upper limit 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 appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.
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. At Everyday Appraisal, we are an authority when it comes to knowing the value of particular items in Bonney Lake and Pierce County neighborhoods. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with income produced by similar properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. It all comes down to this, an appraiser from Everyday Appraisal will help you get the most accurate property value, so you can make profitable real estate decisions.