A Description of the Appraisal Process
Their home's purchase can be the biggest financial decision some people might ever make. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to finance the deal. The title company sees to it that all requirements of the exchange are completed and that a clear title transfers from the seller to the buyer.
So, who makes sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Gregory James Company, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local building costs, labor rates and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Gregory James Company, Inc., we are experts in knowing the value of particular items in Atlanta and Polk County neighborhoods. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this case, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the most reliable 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 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 case they had to sell the property again. Here's what it all boils down to, an appraiser from Gregory James Company, Inc. will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.
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