Understanding the Appraisal Process
Purchasing a house can be the most important transaction most of us might ever consider. It doesn't matter if a main residence, a second vacation home or an investment, purchasing real property is an involved transaction that requires multiple parties to see it through.
The majority of the parties participating are very familiar. The most recognizable face in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to bankroll the deal. And ensuring all areas of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 licensed, certified, professional appraiser from Gregory James Company, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the inspection
Our first task at Gregory James Company, Inc. 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, amenities, etc., to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious amenities - 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 the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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.
An opinion 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 an authority in knowing the worth of real estate features in Cedartown and Polk County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this case, the amount of income the property yields is taken into consideration along with income produced by similar properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Gregory James Company, Inc. will help you attain the most accurate property value, so you can make the most informed real estate decisions.
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