Comprehending Appraisals

A home purchase is the most important financial decision most people may ever encounter. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the money required to finance the deal. And ensuring all requirements of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.

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

So, who makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Kent & Associates Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at Kent & Associates Appraisal is to inspect the property to determine 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 there and are in the shape a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser uses information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

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 Kent & Associates Appraisal, we are an authority when it comes to knowing the value of particular items in Snohomish and Snohomish County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. Prices can always 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 put the property on the market again. At the end of the day, an appraiser from Kent & Associates Appraisal will help you get the most accurate property value, so you can make wise real estate decisions.