Understanding Appraisals

Buying real estate can be the largest investment some may ever make. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.

The majority of the participants are very familiar. The most known entity in the exchange is the real estate agent. Then, the lender provides the financial capital needed to fund the transaction. And the title company sees to it that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

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So, who's responsible for making sure the value of the real estate is in line 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Bridge to Bridge Appraisers will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first responsibility at Bridge to Bridge Appraisers is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, the appraiser uses information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if 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, 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in San Rafael and Marin, Bridge to Bridge Appraisers is your local authority. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this situation, the amount of revenue the real estate yields is factored in with income produced by neighboring properties to derive the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. 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 is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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 get back in the event they had to sell the property again. The bottom line is, an appraiser from Bridge to Bridge Appraisers will help you discover the most fair and balanced property value, so you can make wise real estate decisions.