A Description of the Appraisal ProcessA home purchase is the most significant financial decision most people may ever encounter. It doesn't matter if it's a main residence, a seasonal vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.
Practically all the participants are very familiar. The most known face in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the exchange. The title company ensures that all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller.
So who's responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Acton Appraisals will ensure you as an interested party are informed.
The inspection is where an appraisal beginsOur first duty at Acton Appraisals is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachThis is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to construct a property comparable to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable SalesAppraisers become very familiar with the subdivisions in which they appraise. We thoroughly understand the value of certain 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 at hand. Using knowledge of the value of 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 are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this situation, the amount of income the property produces is factored in 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 stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. 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'. Regardless, 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. It all comes down to this: An appraiser from Acton Appraisals will help you get the most accurate property value, so you can make profitable real estate decisions.