Real Estate Appraisals: A Primer

Their home's purchase is the most serious transaction most will ever consider. It doesn't matter if where you raise your family, a second vacation home or an investment, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

Practically all the participants are quite familiar. The most known face in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to fund the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the real estate is worth the purchase price? In comes the appraiser. 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 Jeff Conway Appraiser will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray the features of subject.

  • Say, for example, the comparable 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.
  • 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Jeff Conway Appraiser, we are experts when it comes to knowing the worth of real estate features in Modesto and Stanislaus County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the property generates is factored in with income produced by comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Jeff Conway Appraiser will help you discover the most fair and balanced property value, so you can make wise real estate decisions.