Making Sense of the Appraisal Process
Purchasing a home can be the most significant investment most will ever make. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the bank provides the money needed to fund the deal. And ensuring all requirements of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who makes sure the real estate 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Perpetual Valuations Group will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Perpetual Valuations Group is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local building costs, the cost of labor and other factors to derive how much it would cost to build a property comparable 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.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches 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 upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Snellville and Gwinnett, Perpetual Valuations Group can't be beat. This approach to value is commonly given the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Perpetual Valuations Group will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.