Welcome
What is the value of my home? Contact certified residential real estate app
Certified Real Estate
appraisal services in San Jose and throughout the Bay Area.
residential appraisal services
why get an appraisal?
HIGH-QUALITY REAL ESTATE APPRAISAL SERVICES FOR:
- Date of Death Valuation
- Divorce Settlement/Dissolution
- Probate and Estate Planning
- Primary and Secondary Mortgages
- Mortgage Refinancing
- Private Mortgage Insurance (PMI) removal
- Property tax Challenges
what is an appraisal?
What is an appraisal?
A home purchase is the largest, single investment most people will ever make. Whether it's a primary residence, a second vacation home, or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.
Most of the people involved are very familiar with the process. The Realtor is the most common face of the transaction. The Mortgage Company provides the financial capital necessary to fund the transaction. The Title Company ensures that all aspects of the transaction are complete and that a clear title passes from the seller to the buyer.
With too many parties exposed in the real estate process, who guarantees that the transaction and the value of the property is commensurate with the amount being paid?
This is where an appraisal comes in. An appraisal is an unbiased estimate of what a buyer might expect to pay - or a seller might receive - for a parcel of real estate, where both buyer and seller are informed parties. To be an informed party, most people turn to a licensed, certified, professional appraiser to provide the most accurate estimate of the true value of their property.
The Appraisal process
The Inspection
Sales Comparison Approach
The Inspection
What goes into a real estate appraisal? It all starts with the inspection. An appraiser's duty is to inspect the subject property being appraised and ascertain the true status of said property. The appraiser must actually see the property’s features—such as the number of bedrooms, bathrooms, the location, and so on—to ensure that the aspects actually exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features – or defects – that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a cost approach, a sales comparison and, in the case of a rental property, an income approach.
Cost Approach
Sales Comparison Approach
The Inspection
The cost approach is the easiest to understand, providing a value indication that is the sum of the estimated land value, plus the depreciated cost of the building and other improvements.
- How it works
The appraiser uses information on local building costs, labor rates, and other factors to determine how much it would cost to construct a property similar to the subject property being appraised.
- Why it's reliable
This value often sets the upper limit on what a property would sell for. Why pay more for an existing property if you could spend less and build a brand-new home instead?
While there may be mitigating factors, such as location and amenities, these are usually not reflected in the cost approach.
Sales Comparison Approach
Sales Comparison Approach
Sales Comparison Approach
Another method appraisers rely on is the sales comparison approach, estimating a property's value by comparing it to similar properties that have recently sold.
- How it works
Appraisers analyze comparable sales, contract sales, and listings to identify differences that could affect the subject property's value. They then adjust their estimate to account for factors like location, market conditions, and physical characteristics.
- Why it's reliable
This approach is based on the principle of substitution, which assumes that a buyer will pay no more for a property than a similar and equally desirable property.
- What to consider
It's important to use recent sales data, as outdated data won't reflect the current market. Appraisers should also consider the type of property, its square footage, number of bedrooms and bathrooms, and other features.
Income Approach
Income Approach
Sales Comparison Approach
A last method is applying an income approach, using a property's income to estimate its market value. It's also known as the income capitalization approach.
- How it works
Calculates a property's value by dividing its net operating income (NOI) by its capitalization rate (cap rate)
- When to use it
Most relevant for buildings owned by landlords, and for early stages of evaluation
- What to consider
The income approach is the most common appraisal method for estimating the value of income-producing real estate. However, it's not the ideal choice for owner-occupied properties because it depends entirely on revenue.
Reconciliation
Income Approach
Reconciliation
After combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors, such as seller motivation, urgency, or ''bidding wars'' that may adjust the final price. Keep in mind, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money that the property is actually worth. The bottom line: an appraiser will help you get the most accurate property value so you CAN make the most informed real estate decisions.