What are the parts of an appraisal?

A home purchase is the most serious investment some will ever make. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.


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Most people are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the lender provides the money needed to bankroll the transaction. The title company ensures that all requirements of the exchange are completed and that a clear title passes to the buyer from the seller.

So what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional California licensed appraiser from Benefiel Appraisal Service will ensure you as an interested party are informed.

Appraisals begin with the home inspection

Our first task at Benefiel Appraisal Service is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the property, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - 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 when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure often 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 communities in which they work. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the property at hand. 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 portray 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.
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.

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. This approach to value is commonly awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this scenario, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all 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 the final sales price even though it is likely the best indication of what a property could sell for in an open market. Depending on the individual situations 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Benefiel Appraisal Service will help you attain the most fair and balanced property value, so you can make wise real estate decisions.