Understanding the Appraisal Process
A home purchase is the largest transaction some may ever consider. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
The majority of the parties participating are very familiar. The real estate agent is the most known person in the exchange. Then, the bank provides the money necessary to fund the deal. And the title company makes sure that all areas of the exchange are completed and that a clear title transfers from the seller to the buyer.
So, who makes sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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.
Inspecting the subject property
Our first responsibility at Gregory James Company, Inc. is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use 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 construction costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property in question. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.
A true estimate of what the subject could 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 real estate features in Cedartown and Polk County neighborhoods. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with income produced by comparable properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the specific 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.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. At the end of the day, an appraiser from Gregory James Company, Inc. will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.