Real Estate Appraisals: A Primer

A home purchase is the most serious investment most people may ever consider. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

You're probably familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the deal. Ensuring all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.

So what party makes sure the real estate is consistent 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 professional Washington licensed appraiser from Anderson & Associates will ensure you as an interested party are informed.

Appraisals start with the home inspection

Our first responsibility at Anderson & Associates is to inspect the property to ascertain its true status. We must physically 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 typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Back at the office, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the communities in which they appraise. We innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

Say, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

When it comes to putting a value on features of homes in Ridgefield and Clark, Anderson & Associates can't be beat. This approach to value is most often awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property would sell for in an open market, it may not be the final sales price. Depending on the specific situations 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. Regardless, the appraised value is typically used 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. The bottom line is: An appraiser from Anderson & Associates will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.