Real Property Appraisals: A Primer

Their home's purchase can be the most important investment most people might ever encounter. Whether it's a main residence, an additional vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to finance the transaction. And ensuring all areas of the sale are completed and that the title is clear to pass 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, what party is responsible for making 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from CTF Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at CTF Appraisals 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, amenities, etc., to ensure they indeed are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we use information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of certain features to the people 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 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 more accurately match the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At CTF Appraisals, we are experts when it comes to knowing the value of particular items in Moorpark and Ventura County neighborhoods. This approach to value is most often given the most weight 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 - we may use a third way of valuing a house. In this scenario, the amount of income the property generates is factored in with income produced by nearby properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from CTF Appraisals will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.