Comprehending Appraisals

Their home's purchase is the most important investment many might ever make. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

The majority of the participants are very familiar. The real estate agent is the most known person in the exchange. Then, the lender provides the money necessary to bankroll the transaction. And the title company makes sure that all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser.

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 value of the property is consistent with the amount being paid? In comes the appraiser. 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 licensed, certified, professional appraiser from NW Cascades Appraisal, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at NW Cascades Appraisal, LLC is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect 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

This is where we pull information on local construction costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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.

For example, if the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Portland and Clackamas, NW Cascades Appraisal, LLC can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the real estate yields is factored in with income produced by neighboring properties to determine the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific circumstances 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 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. It all comes down to this, an appraiser from NW Cascades Appraisal, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.