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What are the parts of an appraisal?

Buying real estate can be the largest financial decision some of us may ever make. It doesn't matter if it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

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


Most of the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the lender provides the money necessary to finance the exchange. Ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.

So what party is responsible for making sure the property is consistent with the amount being paid?   This is where the appraiser comes in.   We provide an unbiased estimate of what a buyer might 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 Appraisal Network will ensure you as an interested party are informed.

The inspection is where an appraisal begins

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must actually see aspects of the property, 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. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often requires 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: sales comparison 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 elements to figure out how much it would cost to build a property comparable to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the communities in which they work. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity 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 are more accurately in line with the features of subject.

  • Say, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.
At Appraisal Network, we are an authority when it comes to knowing the value of real estate features in Huntington Beach and Orange County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. 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 a property's market value It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically 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. Here's what it all boils down to: An appraiser from Appraisal Network will help you attain the most accurate property value, so you can make profitable real estate decisions.