What Goes Into an Appraisal?

Purchasing a house is the biggest financial decision many people could ever consider. It doesn't matter if a main residence, an additional vacation home or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.

Practically all the people involved are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the mortgage company provides the financial capital needed to bankroll the exchange. And ensuring all details of the sale are completed and that the title is clear to transfer 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 might 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 Twin Oaks Appraisal, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first duty at Twin Oaks Appraisal, Inc. is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

After the inspection, 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.

Cost Approach

This is where we gather information on local construction costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • If, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter 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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Twin Oaks Appraisal, Inc. , we are an authority when it comes to knowing the worth of particular items in San Marcos and San Diego County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Twin Oaks Appraisal, Inc. will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.