What Are the Parts of an Appraisal?
A home purchase is the largest investment many might ever make. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Next, the lender provides the financial capital required to bankroll the transaction. And ensuring all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Filson's Real Estate Appraisal Services, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first responsibility at Filson's Real Estate Appraisal Services, Inc. is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, 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, the appraiser uses information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional 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.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Filson's Real Estate Appraisal Services, Inc., we are experts in knowing the value of real estate features in Roswell and Fulton County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house 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 typically employed 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 Filson's Real Estate Appraisal Services, Inc. will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.