A Description of the Appraisal Process
Getting a home is the most serious financial decision most people will ever consider. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to pull it all off.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Then, the mortgage company provides the money required to bankroll the deal. The title company makes sure that all aspects of the exchange are completed and that a clear title passes from the seller to the buyer.
So, what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes 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.
Appraisals begin with the inspection
To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, 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 buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look 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 real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we pull information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property at hand. 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 are more accurately in line with the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true value of features of homes in Cedartown and Polk, Gregory James Company, Inc. is second to none. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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. The bottom line is, an appraiser from Gregory James Company, Inc. will help you attain the most accurate property value, so you can make wise real estate decisions.