What Is an Appraisal?
A home purchase can be the most significant financial decision some will ever consider. Whether it's where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to fund the deal. The title company makes sure that all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, what party is responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. 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 Crest Appraisal Services will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Crest Appraisal Services is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, we use 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.
This is where the appraiser uses information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with 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. At Crest Appraisal Services, we are experts when it comes to knowing the worth of particular items in Seattle and King County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by comparable properties to determine the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on 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. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Crest Appraisal Services will help you discover the most accurate property value, so you can make the most informed real estate decisions.