An Overview of the Appraisal Process
Their home's purchase can be the largest investment some will ever make. It doesn't matter if a main residence, an additional vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.
Most of the participants are very familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to fund the exchange. The title company makes sure that all details of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Hopper-King & Assoc. will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, the cost of labor and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as square footage, additional 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.
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. At Hopper-King & Assoc., we are an authority when it comes to knowing the value of particular items in Stone Mountain and Dekalb County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the strongest 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. 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 recover in the event they had to put the property on the market again. At the end of the day, an appraiser from Hopper-King & Assoc. will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.