Understanding the Appraisal Process
Getting real estate is the most serious investment some may ever make. Whether it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the transaction. Next, the bank provides the financial capital required to finance the deal. And ensuring all areas of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. 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 licensed, certified, professional appraiser from Watermark Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
Our first responsibility at Watermark Appraisal Services is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect 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.
Here, the appraiser uses information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the upper limit 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 communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
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. When it comes to knowing the true worth of features of homes in Kennewick and Benton, Watermark Appraisal Services is your local authority. This approach to value is most often given the most importance 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 way of valuing a house. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. 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 typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. At the end of the day, an appraiser from Watermark Appraisal Services will help you get the most fair and balanced property value, so you can make wise real estate decisions.