Understanding the Appraisal Process
Their home's purchase is the most important investment most of us may ever consider. It doesn't matter if a primary residence, a second vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
Practically all the people involved are quite familiar. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the financial capital required to fund the exchange. And ensuring all details of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party makes sure the real estate is worth the amount being paid? 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 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 begin with the property inspection
Our first responsibility at Gregory James Company, Inc. is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches to determining the value of real property: sales comparison 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 ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers are intimately 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 researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
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 value of real estate features in Cedartown and Polk County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. 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. The bottom line is, an appraiser from Gregory James Company, Inc. will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.