Making Sense of the Appraisal Process

One’s home purchase is the most serious financial decision some of us might ever encounter. Whether it’s where you raise your family, a second vacation property or an investment, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties having a role in the transaction. The most known face in the transaction is the real estate agent. Next, the lender provides the money required to bankroll the exchange. The title company makes sure that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.

So what party is responsible for making sure the real estate is consistent with the purchase price?   In comes the appraiser.   We provide an unbiased estimate of what a buyer might expect to pay – or a seller receive – for a property, where both buyer and seller are informed parties. A professional Georgia licensed appraiser from Amped Appraisal Services Group will ensure you as an interested party are informed.

Inspecting the subject property

Our first task at Amped Appraisal Services Group is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities – or defects – that would affect the value of the property.

Following the inspection, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser pulls information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It’s also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they work. We innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are ‘comparable’ to the subject in question. 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

• For example, if the comparable has a storm shelter and the subject doesn’t, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
• However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable 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. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when an area has a measurable number of rental properties. In this scenario, the amount of income the real estate produces is factored in with income produced by nearby properties to give an indicator of the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property’s market value Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or ‘bidding wars’. Regardless, the appraised value is typically employed 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. It all comes down to this: An appraiser from Amped Appraisal Services Group will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.