What Is an Appraisal?

Acquiring a house is the largest investment some of us will ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

The majority of the people involved are quite familiar. The most known face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to finance the exchange. And the title company makes sure that all aspects of the sale are completed and that the title is clear to transfer from the seller to the buyer.

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 value of the property is in line with the purchase price? This is where the appraiser comes in. 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 Manuel Reyes R.E. Appraiser will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Manuel Reyes R.E. Appraiser is to inspect the property to ascertain its true status. We must see features first hand, 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. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper 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.

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

Cost Approach

Here, we use information on local building costs, labor rates and other factors to determine how much it would cost to build a property nearly identical 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.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, additional 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.

  • For example, if the comparable 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.
  • 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.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Morgan Hill and Santa Clara, Manuel Reyes R.E. Appraiser can't be beat. The sales comparison approach to value is typically given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. 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 valueIt'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'. 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 case they had to sell the property again. It all comes down to this, an appraiser from Manuel Reyes R.E. Appraiser will help you discover the most accurate property value, so you can make the most informed real estate decisions.