Breaking Down the the Appraisal Process

Getting real estate is the most important investment many people could ever make. Whether it's where you raise your family, an additional vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.


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Practically all the people involved are very familiar. The real estate agent is the most familiar person in the transaction. Next, the mortgage company provides the money required to bankroll the exchange. The title company makes sure that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.

So who makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional California licensed appraiser from A J REAL ESTATE APPRAISAL SERVICES will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable 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 affect the value of the house.

Following the inspection, an appraiser employs two or three approaches when 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, labor rates and other factors to determine how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
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.

When it comes to putting a value on features of homes in Auburn and Sacramento, A J REAL ESTATE APPRAISAL SERVICES is your local authority. This approach to value is most often awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value 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'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day: An appraiser from A J REAL ESTATE APPRAISAL SERVICES will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.

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