What Goes Into an Appraisal?

A home purchase can be the largest investment some people will ever make. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to see it through.

Most of the participants are quite familiar. The most familiar face in the transaction is the real estate agent. Then, the lender provides the money required to fund the exchange. And ensuring all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller 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, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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 RWA Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at RWA Appraisals is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

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

Cost Approach

Here, we gather information on local building costs, the cost of labor and other factors to calculate how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable 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. At RWA Appraisals, we are experts in knowing the worth of real estate features in Port Orchard and Kitsap County neighborhoods. This approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of revenue the property yields is factored in with income produced by similar properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. 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 sell the property again. Here's what it all boils down to, an appraiser from RWA Appraisals will help you get the most fair and balanced property value, so you can make profitable real estate decisions.