Real Estate Appraisals: A Primer
A home purchase can be the most significant transaction some people may ever encounter. It doesn't matter if a primary residence, an additional vacation property or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Then, the mortgage company provides the money needed to bankroll the deal. The title company ensures that all details of the sale are completed and that the title is clear to transfer to the buyer from the seller.
So, what party makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Sound Appraisal Group, Inc will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at Sound Appraisal Group, Inc is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local building costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers get to know 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 sales in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
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. When it comes to valuing features of homes in Silverdale and Kitsap, Sound Appraisal Group, Inc is second to none. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this situation, the amount of income the real estate produces is factored in with income produced by comparable properties to determine the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the final sales price. Depending on the individual circumstances 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Sound Appraisal Group, Inc will help you discover the most accurate property value, so you can make the most informed real estate decisions.