Decoding the Appraisal Process

A home purchase can be the most important investment many of us might ever make. Whether it's a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to see it through.


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It's likely you are familiar with the parties having a role in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the financial capital needed to fund the exchange. The title company makes sure that all areas of the sale are completed and that a clear title transfers from the seller to the buyer.

So what party makes sure the value of the property is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Washington licensed appraiser from Kent & Associates Appraisal will ensure you as an interested party are informed.

Appraisals start with the home inspection

To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

After the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where we gather information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. We innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

Say, for example, the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With the Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. It all comes down to this: An appraiser from Kent & Associates Appraisal will help you get the most fair and balanced property value, so you can make profitable real estate decisions.