A Description of the Appraisal ProcessOne's home purchase can be the most important investment some of us may ever make. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most recognizable face in the transaction. Then, the mortgage company provides the financial capital required to bankroll the transaction. Ensuring all requirements of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So what party is responsible for making sure 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 parcel of real estate, where both buyer and seller are informed parties. A professional Washington licensed appraiser from Reese Appraisal Service will ensure you as an interested party are informed.
Inspecting the subject propertyTo determine the true status of the property, it's our duty to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser employs two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostHere, we gather information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers become very familiar with the subdivisions in which they work. We innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the neighborhood 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachA third way of valuing a property is sometimes employed when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by nearby properties to determine the current value.
The Bottom LineCombining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the most accurate indication of what a property would sell for in an open market, it may not be the final sales price. It'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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Reese Appraisal Service will help you get the most fair and balanced property value, so you can make wise real estate decisions.