What Are the Parts of an Appraisal?
A home purchase can be the biggest investment most might ever encounter. Whether it's where you raise your family, an additional vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Most of the participants are very familiar. The real estate agent is the most familiar entity in the exchange. Next, the bank provides the money needed to finance the transaction. And the title company ensures that all aspects of the exchange are completed and that a clear title passes from the seller to the purchaser.
So, who's responsible for making sure the value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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.
Inspecting the subject property
Our first responsibility at Sound Appraisal Group, Inc is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of particular 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 subject in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Silverdale and Kitsap, Sound Appraisal Group, Inc can't be beat. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes employed when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining 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 strongest indication of what a house is worth, it probably will not be the final sales price. There 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. Regardless, 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 attain the most fair and balanced property value, so you can make wise real estate decisions.