What You Need to Know About the Home Appraisal Process

Whether you’re considering the purchase of a home in Southern California, or you have a property you’re thinking about selling, the home appraisal process can be confusing.  Here’s what you need to know about the appraisal process.

Why Do I Need a Home Appraisal?

If you’re a home buyer, the appraiser is sent in to see what the home you’re purchasing is worth at current market value. This is usually done after you make an offer on a home and the seller accepts the offer. The lender you’re working with will want to know if the home is a worthy investment and the amount you’ve offered is acceptable.

If you’re a home seller, you may call an appraiser in before you consider selling your property to make sure you’re getting the best possible price for the value.

What is the Appraiser Looking For?

The appraiser will check out the physical property by making a visit in person. He will begin by taking photographs and measurements of the outside of the house. When the outside observations are complete, he will move inside and photograph the room and features. He will measure the inside rooms and make a note of any upgrades.

Upgrades can make a big difference in the end result of the appraisal. He’ll look for material upgrades in things like counter tops and floors. He will consider other factors such as: views, pools/spas, proximity to roads and highways, number of garages, and the condition of the home.

Is That All He Needs?

The appraiser can’t just look at your home and give an opinion on the market value based on the details about your home alone. He will find comparable properties to use in his assessment. For a property to be used in comparison it must be similar to yours and have been sold in the past 3-6 months preferably and be within the same general neighborhood. If he can’t find one within a mile, he may go outside of that, but the idea is to find the comparable properties as close to yours as possible for accuracy.

He will consider other factors, as well. The appraiser will consider the area in which you live, the type of growth that’s being experienced in your city and the employment rate. Trends in the real estate market itself are important to consider.

He’s Gathered All the Information. Now What?

Once the appraiser has all the information he needs it’s time for him to sit down and crunch some numbers as he looks at the facts he’s gathered. If one of the comparison houses sold for $200,000, but your house has one more bathroom, the appraiser may add 10K to the estimated value of your home. This depends on the value of such things in the current market, and we will just use 10K as example amount.

Is That All There Is To This? 

Yes and no. How the appraiser calculates the estimated value of your home is dependent on which of the three methods he uses to make the comparisons. There are three main ways to determine value. There is the Sales Comparison Approach, The Cost Method, and the Income Method.

The Sales Comparison Approach is used frequently for single family homes. This is where he will compare your home with other comparable homes and consider the other factors like upgrades and local information.

The Cost Method is used mainly for properties that are not used as homes, such as churches and schools. With this method, the appraiser will consider the value of the actual land separately from the structure on the land. He will consider how much it would take to replace the structure at today’s costs, taking depreciation into account. Then, he adds back in the value of the land and comes up with his estimated market value.

The Income Method is used most on investment and rental properties. The appraiser considers the amount of monthly rent that can be charged for the property, deducts expenses and figures out the net income amount.

Can You Do My Appraisal?

An appraiser must be licensed to perform an appraisal on your home, but if you want to get a idea of home value, we can help. The real estate specialists at the Ballen Group California can help you by offering you a market analysis of your home. Let us help take the confusion out of the home selling or buying process. Call the Ballen Group California's Southern California real estate agents today at 800-805-8354. Let us WOW you!