Real Property Appraisals: A Primer

Acquiring real estate is the biggest transaction most of us could ever make. Whether it's a main residence, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the transaction. Then, the mortgage company provides the money necessary to bankroll the exchange. And ensuring all areas of the exchange are completed and that a clear title passes 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's 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 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 Central Washington Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Central Washington Appraisal Services is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we analyze information on local construction costs, the cost of labor and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods 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 close proximity to the subject and finds properties which are 'comparable' to the home in question. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • If the subject property 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. When it comes to knowing the true value of features of homes in Yakima and Yakima, Central Washington Appraisal Services can't be beat. This approach to value is commonly awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when a neighborhood has a measurable number of rental properties. 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.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Central Washington Appraisal Services will help you get the most accurate property value, so you can make profitable real estate decisions.