Understanding Appraisals

Buying a house is the most significant transaction many might ever encounter. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

You're likely to be familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to fund the exchange. And ensuring all details of the transaction are completed and that a clear title transfers 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, what party makes sure the value of the property is in line with the purchase price? In comes 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 Accelerated Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, 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 property.

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

Replacement Cost

Here, we use information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

Say, for example, the comparable has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter 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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Accelerated Appraisal Services, we are an authority when it comes to knowing the value of real estate features in Bend and Deschutes 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

A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueIt'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 often 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 Accelerated Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.