Home Appraisals: A Primer

Purchasing real estate can be the biggest transaction some may ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to see it through.


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It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the money required to fund the deal. Ensuring all aspects of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.

So what party makes sure the value of the real estate is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Washington licensed appraiser from LSI Appraisal, LLC. will ensure you as an interested party are informed.

Appraisals begin with the home inspection

Our first task at LSI Appraisal, LLC. is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly 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 describe the layout of the home, the inspection often entails creating a sketch of the floor plan. 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, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser gathers information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, 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 property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to valuing features of homes in Burien and King, LSI Appraisal, LLC. is second to none. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate exchange.

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 case, the amount of income the property produces is factored in with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a property would sell for in an open market, it may not be the final sales price. 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'. 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 would likely sell for in an open marketplace. It all comes down to this: An appraiser from LSI Appraisal, LLC. will help you attain the most fair and balanced property value, so you can make wise real estate decisions.