What Goes Into an Appraisal?

Buying real estate can be the biggest investment many could ever make. Whether it's a primary residence, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the transaction. Then, the lender provides the financial capital necessary to finance the exchange. And ensuring all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

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So, who makes sure the value of the real estate 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 Carolynn Ulrich will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser pulls information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value usually 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 become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of particular 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 real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • But, 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 valuing features of homes in Redwood City and San Mateo, Carolynn Ulrich is your local authority. The sales comparison approach to value is most often given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate produces is factored in with income produced by neighboring properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. Depending on the individual circumstances 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 typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. It all comes down to this, an appraiser from Carolynn Ulrich will help you discover the most accurate property value, so you can make wise real estate decisions.