Home Appraisals: A Primer
Buying real estate can be the most important transaction some might ever make. It doesn't matter if a main residence, an additional vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.
You're probably familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the money needed to fund the exchange. And the title company sees to it that all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 home inspection
To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, 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 house.
Once the site has been inspected, we use 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, we pull information on local building costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
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 putting a value on features of homes in Cedartown and Polk, Gregory James Company, Inc. is second to none. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the property yields is factored in with income produced by neighboring properties to derive the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. 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 they could get back in case they had to put the property on the market again. At the end of the day, 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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