Home Appraisals: A Primer

One's home purchase is the most significant investment some will ever make. It doesn't matter if it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

Most people are familiar with the parties taking part in the transaction. The most familiar entity in the exchange is the real estate agent. Next, the lender provides the money required to fund the exchange. Ensuring all aspects of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

So who's responsible for making sure the value of the real estate is consistent with the purchase price?   In comes the appraiser.   We provide an unbiased opinion 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, certified, California licensed appraiser from Westside Appraisal Solutions will ensure you as an interested party are informed.

Inspecting the subject property

Our first responsibility at Westside Appraisal Solutions is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable person would expect them to be. The inspection often includes but not limited to a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property, materials/finishes used, any noted view amenities, positive or negative locational factors, etc. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Upon completing the inspection, we consider the use of all three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent. The sales comparison approach is typically the most common approach used when valuing SFR's and condos in an area that is primarily owner occupied.

Cost Approach

This is where the appraiser uses information on local construction costs, the cost of labor and other elements to determine 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. In many cases in the West LA and surrounded nearby areas, the cost approach is not applicable due to the lack of adequate land sales.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By applying market adjustments in the form of a dollar amount based on appraisal industry standards in a particular neighborhood for certain items such as pool, spa, guest house, view, overall condition, overall quality of construction, etc., we add or subtract from each comparable's sales price so that they more accurately portray the features as compared to the subject property.

  • If, for example, the comparable property has a guest house or pool/spa amenity and the subject doesn't, the appraiser may subtract the value of that amenity from the sales price of the comparable home.
  • If the subject property has view amenity and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to putting a value on features of homes in West LA and surrounding nearby areas, Westside Appraisal Solutions can't be beat. We also fully understand the complex locational factors that play a big part in choosing the most appropriate comparables when valuing a specifric property. Our 20+ years of experience and expertise has given us the tools to "properly" value homes on the Westside and surrouding nearby areas.

Valuation Using the Income Approach

In the case of income producing properties, the appraiser may use an additional method of valuing a property. In this case, the amount of income the property generates is factored in with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 Westside Appraisal Solutions will help you discover the most accurate property value, so you can make "smart and informed" real estate decisions.