Real Property Appraisals: A Primer

Acquiring real estate is the most serious investment many might ever make. Whether it's a primary residence, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

The majority of the people participating are quite familiar. The most recognizable face in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to fund the transaction. And ensuring all areas of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.

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 property is worth the amount being paid? 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 licensed, certified, professional appraiser from MacBride Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - 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 real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we analyze information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to 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 are more accurately in line with the features of subject.

  • If, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At MacBride Appraisal, we are an authority in knowing the worth of real estate features in Carlsbad and San Diego County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by similar properties to determine the current value.

Reconciliation

Examining the data from all applicable 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 necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices 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 get back in the event they had to sell the property again. The bottom line is, an appraiser from MacBride Appraisal will help you discover the most accurate property value, so you can make wise real estate decisions.