Real Property Appraisals: A Primer
Their home's purchase can be the most important financial decision some will ever encounter. It doesn't matter if where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
Most of the parties participating are quite familiar. The most known face in the transaction is the real estate agent. Then, the mortgage company provides the money required to bankroll the deal. And ensuring all requirements 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 consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from J Christian Property Advisors LLC. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at J Christian Property Advisors LLC. 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, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Back at the office, 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 the appraiser analyzes information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At J Christian Property Advisors LLC., we are experts when it comes to knowing the value of particular items in Senoia and Coweta County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.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 is actually worth. The bottom line is, an appraiser from J Christian Property Advisors LLC. will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.
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