Real Property Appraisals: A Primer
A home purchase can be the most important financial decision most people could ever consider. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
The majority of the people participating are very familiar. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the money required to bankroll the exchange. And the title company sees to it that all aspects of the exchange are completed and that a clear title passes from the seller to the buyer.
So, what party makes sure the value of the real estate is consistent with the amount being paid? 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 property, 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.
Inspecting the subject property
Our first responsibility at Anderson & Associates is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where we analyze information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Vancouver and Clark, Anderson & Associates is your local authority. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. 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 often employed 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. The bottom line is, an appraiser from Anderson & Associates will help you attain the most accurate property value, so you can make profitable real estate decisions.