Home Appraisals: A Primer

Purchasing a home is the largest investment most of us could ever encounter. It doesn't matter if a main residence, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.

Practically all the participants are quite familiar. The real estate agent is the most known face in the transaction. Then, the bank provides the money required to bankroll the transaction. And the title company sees to it that all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes 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 property, 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.

Inspecting the subject property

Our first responsibility at Pulse Appraisal 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, living areas, etc, to ensure they really are there and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

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 the appraiser analyzes information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain 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 at hand. Using knowledge of the value of 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.

  • For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may subtract 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.

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 Pulse Appraisal , we are an authority when it comes to knowing the value of real estate features in White Salmon and Klickitat County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the individual 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 often employed 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 put the property on the market again. The bottom line is, an appraiser from Pulse Appraisal will help you attain the most accurate property value, so you can make profitable real estate decisions.