A Description of the Appraisal Process

Their home's purchase is the most significant transaction many people could ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.

The majority of the people participating are quite familiar. The real estate agent is the most known entity in the transaction. Next, the bank provides the financial capital required to finance the exchange. And ensuring all details of the transaction are completed and that the title is clear to transfer from the seller to the buyer 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 makes sure the property is worth the purchase price? This is where you meet 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 Chung Chang will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - 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 pull information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Chung Chang, we are experts when it comes to knowing the worth of particular items in San Mateo and San Mateo County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a property is worth, it probably will not be the final sales price. 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. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. The bottom line is, an appraiser from Chung Chang will guarantee you get the most accurate property value, so you can make profitable real estate decisions.