Making Sense of the Appraisal Process

A home purchase is the most important transaction most people may ever encounter. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed 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 people involved are quite familiar. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the financial capital necessary to finance the deal. Ensuring all areas of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company.

So what party is responsible for making sure the real estate is consistent with the amount being paid?   In comes the appraiser.   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 Middleton Real Estate Appraisals will ensure you as an interested party are informed.

The inspection is where an appraisal starts

To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we use information on local building costs, labor rates and other elements to ascertain how much it would cost to build a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers get to know the subdivisions in which they appraise. We innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. This approach to value is usually given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state 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 what a property could sell for in an open market. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, 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. At the end of the day: An appraiser from Middleton Real Estate Appraisals will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.