Home Appraisals: A PrimerGetting real estate is the most serious investment most of us will ever encounter. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to fund the exchange. The title company sees to it that all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser.
So what party makes sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Georgia licensed appraiser from Elliott Realty & Appraisal will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where the appraiser gathers information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers can tell you a lot about the communities in which they appraise. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of 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 more accurately portray the features of subject.
Valuation Using the Income ApproachA third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Coming Up With the Final ValueAnalyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 would likely sell for in an open marketplace. At the end of the day: An appraiser from Elliott Realty & Appraisal will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.