Understanding Appraisals

Purchasing real estate can be the most important financial decision most of us will ever consider. Whether it's a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

The majority of the people involved are very familiar. The most known entity in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the deal. And the title company sees to it that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.

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

So, who makes sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. 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.

Inspecting the subject property

Our first duty at Bridge to Bridge Appraisers is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, we use 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.

Cost Approach

This is where the appraiser analyzes information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This figure commonly 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 communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

Once all necessary adjustments have been made, 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 experts in knowing the value of particular items in San Rafael and Marin County neighborhoods. This approach to value is most often given the most consideration 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 a third approach to value. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by nearby properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, 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. Here's what it all boils down to, an appraiser from Bridge to Bridge Appraisers will help you attain the most accurate property value, so you can make wise real estate decisions.