What Are the Parts of an Appraisal?

A home purchase can be the biggest financial decision some of us will ever make. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the mortgage company provides the money necessary to finance 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.

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So, who makes sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might 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.

The inspection is where an appraisal starts

Our first responsibility at Bridge to Bridge Appraisers is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

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

Replacement Cost

This is where we gather information on local building costs, the cost of labor and other factors to figure out how much it would cost to build a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Bridge to Bridge Appraisers, we are experts when it comes to knowing the value of real estate features in San Rafael and Marin County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of income the real estate produces is factored in with income produced by comparable properties to give an indicator of the current value.

The Bottom Line

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueIt'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'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Bridge to Bridge Appraisers will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.