Getting a house can be the most significant financial decision most people will ever encounter. Whether it's a main residence, a second vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties having a role in the transaction. The most familiar entity in the exchange is the real estate agent. Then, the bank provides the money necessary to bankroll the exchange. And the title company ensures that all aspects of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So, who makes sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 start with the home inspection
To determine the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a reasonable person would expect them to be. To ensure the stated square footage is accurate and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local construction costs, labor rates and other factors to figure out how much it would cost to build a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the home in question. 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.
A true estimate 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 worth of particular items in Roswell and Fulton County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate generates is taken into consideration along with income produced by nearby properties to determine the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used 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 attain the most fair and balanced property value, so you can make the most informed real estate decisions.