What Is an Appraisal?

Acquiring a home is the most significant investment many may ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to see it through.

Practically all the people involved are very familiar. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the money required to bankroll the deal. The title company makes sure that all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller.

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So, who makes sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. 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 Urbano Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Urbano Appraisal Services is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, 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.

Cost Approach

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

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • 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.

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. When it comes to knowing the true value of features of homes in San Diego and San Diego, Urbano Appraisal Services is your local authority. The sales comparison approach to value is commonly given the most consideration 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 - the appraiser may use an additional approach to value. In this case, the amount of revenue the real estate generates is factored in with income produced by nearby properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property is worth, it probably will not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Urbano Appraisal Services will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.