What are the components of an appraisal?

Getting a home can be the most serious transaction many of us could ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved transaction that requires multiple parties to make it all happen.


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

Most people are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to finance the exchange. The title company makes sure that all requirements of the transaction are completed and that a clear title passes from the seller to the purchaser.

So what party is responsible for making 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 professional California licensed appraiser from Appraisal Options will ensure you as an interested party are informed.

Appraisals start with the property inspection

Our first responsibility at Appraisal Options is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we analyze information on local building costs, labor rates and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. We thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as upgraded appliances, extra 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.

Say, for example, the comparable property 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.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. This approach to value is typically given 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 an additional method of valuing a house. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With the Final Value

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a house would sell for in an open market, it probably will not be the final sales price. 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 often 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. At the end of the day: An appraiser from Appraisal Options will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.