What Is an Appraisal?

Acquiring a home is the most significant transaction many of us will ever consider. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

You're probably familiar with the parties taking part in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to fund the transaction. The title company makes sure that all areas of the transaction are completed and that the title is clear to pass 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 property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Anderson-Buysse Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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 more accurately match the features of subject property.

  • If, for example, 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 home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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. When it comes to putting a value on features of homes in San Diego and San Diego, Anderson-Buysse Appraisal can't be beat. This approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing a property. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. 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 final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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 Anderson-Buysse Appraisal will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.