What Goes Into an Appraisal?
Acquiring a home can be the most significant financial decision some might ever consider. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the bank provides the financial capital necessary to fund the deal. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 licensed, certified, professional appraiser from RWA Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at RWA Appraisals is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison 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 figure out how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.
An opinion 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 knowing the true worth of features of homes in Port Orchard and Kitsap, RWA Appraisals is your local authority. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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 is actually worth. It all comes down to this, an appraiser from RWA Appraisals will help you get the most accurate property value, so you can make wise real estate decisions.