What Is an Appraisal?

Purchasing a home can be the most serious investment some of us may ever consider. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Practically all the people participating are very familiar. The most known person in the transaction is the real estate agent. Next, the bank provides the financial capital required to fund the deal. And ensuring all areas of the exchange are completed and that the title is clear to pass from the seller to the purchaser 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 real estate is worth the purchase price? 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 Pulse Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine the true status of the property, it's our duty to first complete a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed 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 entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use 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 the appraiser pulls information on local construction costs, the cost of labor and other elements to figure out how much it would cost to build a property similar to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • 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.

After all differences have been accounted for, 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 White Salmon and Klickitat, Pulse Appraisal is your local authority. This approach to value is most often given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable 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 this amount is probably the most reliable indication of what a house is worth, it may 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 the property is actually worth. It all comes down to this, an appraiser from Pulse Appraisal will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.