Real Estate Appraisals: A PrimerOne's home purchase is the most important financial decision most may ever encounter. Whether it's a main residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
Most of the people involved are quite familiar. The most known person in the exchange is the real estate agent. Next, the bank provides the money required to fund the deal. Ensuring all details of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes 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 Ashcroft and Associates will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
After the inspection, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostThis is where the appraiser analyzes information on local building costs, the cost of labor and other factors to calculate how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers get to know the communities in which they appraise. We innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom LineCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate 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'. But the appraised value is often 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. At the end of the day: An appraiser from Ashcroft and Associates will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.