What Are the Parts of an Appraisal?
A home purchase is the largest transaction most people may ever make. It doesn't matter if a primary residence, a second vacation home or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
The majority of the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Next, the bank provides the money required to bankroll the transaction. The title company makes sure that all requirements of the transaction are completed and that a clear title transfers from the seller to the buyer.
So, what party is responsible for making sure the property is worth the purchase price? This is where you meet 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 licensed, certified, professional 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 determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
After the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, the cost of labor and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. 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.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Anderson & Associates, we are experts when it comes to knowing the worth of real estate features in Vancouver and Clark County neighborhoods. This approach to value is commonly awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this case, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to determine the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not always 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 the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 they could get back in the event they had to put the property on the market again. It all comes down to this, an appraiser from Anderson & Associates will guarantee you discover the most accurate property value, so you can make wise real estate decisions.