What Is an Appraisal?
Their home's purchase is the biggest financial decision most of us might ever encounter. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Most of the participants are very familiar. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the money needed to bankroll the transaction. And the title company sees to it that all details of the sale are completed and that a clear title transfers from the seller to the buyer.
So, what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 Cole & Company Appraisal Services, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we use information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of 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 more accurately match the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Vancouver and Clark, Cole & Company Appraisal Services, Inc. can't be beat. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the real estate generates is factored in with income produced by neighboring properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a house 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Cole & Company Appraisal Services, Inc. will help you get the most accurate property value, so you can make profitable real estate decisions.