Understanding Appraisals

Their home's purchase is the most important financial decision many people will ever consider. Whether it's a primary residence, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

Practically all the participants are very familiar. The real estate agent is the most known person in the exchange. Next, the lender provides the money required to bankroll the transaction. And the title company sees to it that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.

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So, who's responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Bridge to Bridge Appraisers will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, we pull information on local construction costs, the cost of labor and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace 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.

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. At Bridge to Bridge Appraisers, we are an authority in knowing the worth of particular items in San Rafael and Marin County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

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

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. Prices can always 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. At the end of the day, an appraiser from Bridge to Bridge Appraisers will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.