Decoding the Appraisal Process

Purchasing a house is the largest financial decision some might ever encounter. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.

Most of the participants are very familiar. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital required to finance the exchange. The title company ensures that all aspects 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 makes sure the property is worth 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from MacBride Appraisal will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often includes 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 house.

After the inspection, 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.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, labor rates and other elements to derive how much it would cost to build a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • For example, if 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 home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. When it comes to associating a value with features of homes in Carlsbad and San Diego, MacBride Appraisal is your local authority. This approach to value is typically awarded the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by nearby properties to give an indicator of the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, 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 the event they had to sell the property again. It all comes down to this, an appraiser from MacBride Appraisal will guarantee you get the most accurate property value, so you can make profitable real estate decisions.