What Are the Parts of an Appraisal?
Getting a house is the biggest financial decision many may ever make. Whether it's a primary residence, an additional vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Most of the parties participating are quite familiar. The most known face in the transaction is the real estate agent. Then, the lender provides the financial capital required to fund the transaction. And ensuring all details of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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.
Inspecting the subject property
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
After the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we analyze information on local building costs, the cost of labor and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
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 experts when it comes to knowing the worth of particular items in Atlanta and Polk County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home purchase.
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 case, the amount of revenue the real estate generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a house 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Gregory James Company, Inc. will help you discover the most accurate property value, so you can make the most informed real estate decisions.
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