Understanding the Appraisal Process

Buying a home can be the most important financial decision most people will ever encounter. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the bank provides the financial capital required to bankroll the exchange. And ensuring all details of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Pine State Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Pine State Appraisals is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a typical buyer would expect them to be. To ensure the stated square footage is accurate and document the layout of the property, the inspection often entails 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 house.

After the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we pull information on local building costs, labor rates and other factors to figure out how much it would cost to build a property nearly identical to the one being appraised. This figure 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 subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.

Say, for example, the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

An opinion 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 knowing the true worth of features of homes in Lawrenceville and Gwinnett, Pine State Appraisals can't be beat. The sales comparison approach to value is typically 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 employed when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to stipulate 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 what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often employed 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. It all comes down to this, an appraiser from Pine State Appraisals will help you discover the most fair and balanced property value, so you can make wise real estate decisions.