What Are the Parts of an Appraisal?
Purchasing real estate is the largest transaction many might ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the money needed to finance the exchange. And ensuring all areas 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 is responsible for making sure the property is worth the purchase price? 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 licensed, certified, professional appraiser from Gregory James Company, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often entails 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.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser analyzes information on local building costs, labor rates and other factors to derive how much it would cost to build a property similar to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. 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.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Gregory James Company, Inc., we are an authority when it comes to knowing the worth of real estate features in Cedartown and Polk County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a house. 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 determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is typically employed 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 guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.
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