What Goes Into an Appraisal?

Their home's purchase is the most important transaction most of us may ever encounter. Whether it's a primary residence, a seasonal vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to see it through.

The majority of the people involved are very familiar. The real estate agent is the most recognizable face in the transaction. Next, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller 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 amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Cambra and Associates Appraisal Services will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, 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 typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

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

Cost Approach

Here, the appraiser analyzes information on local construction costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This value usually 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 subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • 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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Oceanside and San Diego, Cambra and Associates Appraisal Services is your local authority. The sales comparison approach to value is commonly given the most weight 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 an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this, an appraiser from Cambra and Associates Appraisal Services will help you discover the most accurate property value, so you can make wise real estate decisions.