Real Estate Appraisals: A Primer
Their home's purchase can be the biggest investment many might ever consider. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.
Most of the parties involved are very familiar. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money needed to finance the exchange. And the title company sees to it that all details of the sale are completed and that a clear title passes to the buyer from the seller.
So, what party makes sure the value of the real estate is in line with the purchase price? In comes 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.
Appraisals begin with the home inspection
To ascertain the true status of the property, it's our responsibility to first conduct 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 truly are present and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the house, the inspection often requires 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.
Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we gather information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, 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 in knowing the worth of particular items in Cedartown and Polk County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate generates is factored in with income produced by similar properties to derive the current value.
The Bottom Line
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 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 an offer or listing price up or down. But the appraised value is often 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 help you attain the most fair and balanced property value, so you can make wise real estate decisions.