Real Property Appraisals: A Primer
Their home's purchase can be the biggest financial decision some of us might ever encounter. Whether it's a main residence, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
Practically all the people participating are very familiar. The most familiar person in the exchange is the real estate agent. Next, the lender provides the financial capital required to fund the exchange. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party is 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 might 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 home inspection
Our first task at Filson's Real Estate Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, 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.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local building costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know 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 transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray 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 Filson's Real Estate Appraisal Services, Inc., we are an authority when it comes to knowing the value of real estate features in Roswell and Fulton County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this scenario, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Examining the data from all applicable approaches, the appraiser is then ready to state 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 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'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is, an appraiser from Filson's Real Estate Appraisal Services, Inc. will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.