What Goes Into an Appraisal?

Buying a house can be the largest financial decision most people may ever encounter. Whether it's a main residence, an additional vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Practically all the people participating are quite familiar. The real estate agent is the most known entity in the exchange. Next, the bank provides the financial capital required to bankroll the transaction. And ensuring all requirements of the transaction are completed and that a clear title passes 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 value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 MacBride Appraisal will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at MacBride Appraisal is to inspect the property to ascertain its true status. We must actually 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 buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, the appraiser pulls information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
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.

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 MacBride Appraisal, we are experts when it comes to knowing the value of particular items in Carlsbad and San Diego County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to put down 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 what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from MacBride Appraisal will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.