Home Appraisals: A PrimerA home purchase can be the largest investment most of us will ever make. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most of the participants are quite familiar. The most known face in the transaction is the real estate agent. Next, the bank provides the financial capital needed to fund the transaction. Ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So who makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Washington licensed appraiser from Broadway Appraisal LLC will ensure you as an interested party are informed.
The inspection is where an appraisal beginsOur first task at Broadway Appraisal LLC is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a reasonable person would expect them to be. To ensure the stated square footage is accurate and describe the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachThis is where we gather information on local building costs, labor rates and other elements to figure out how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers can tell you a lot about the neighborhoods in which they work. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom LineExamining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a property would sell for in an open market, it probably will not be the final sales price. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is: An appraiser from Broadway Appraisal LLC will guarantee you get the most accurate property value, so you can make wise real estate decisions.