A Description of the Appraisal Process
Purchasing a house can be the most important investment many will ever encounter. It doesn't matter if a main residence, an additional vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the money needed to finance the deal. And the title company sees to it that all aspects of the sale are completed and that a clear title passes from the seller to the purchaser.
So, what party is responsible for making sure the value of the real estate is consistent with 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 Sound Appraisal Group, Inc will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed 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 accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
After the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser pulls information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Sound Appraisal Group, Inc, we are experts in knowing the worth of real estate features in Silverdale and Kitsap County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the property yields is factored in with income produced by similar 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 property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 recover in the event they had to sell the property again. The bottom line is, an appraiser from Sound Appraisal Group, Inc will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.