Home Appraisals: A Primer

Their home's purchase is the largest transaction most of us might ever make. It doesn't matter if a primary residence, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.

Practically all the parties involved are quite familiar. The most known person in the exchange is the real estate agent. Then, the lender provides the money necessary to fund the exchange. And the title company sees to it that all areas of the exchange are completed and that a clear title passes 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, what party is responsible for making sure the property is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Urban Appraisal, LLC. will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually view features, 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 person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, we use 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.

Cost Approach

This is where we pull information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately 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 home at hand. 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, 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.
  • If the subject property 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. At Urban Appraisal, LLC. , we are experts when it comes to knowing the value of particular items in Sacramento and Sacramento County neighborhoods. This approach to value is commonly given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along with income produced by neighboring properties to determine the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 they could recover in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Urban Appraisal, LLC. will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.