Home Appraisals: A Primer

Purchasing real estate can be the most serious investment many will ever make. Whether it's a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to see it through.

The majority of the people participating are quite familiar. The real estate agent is the most familiar face in the transaction. Then, the bank provides the money necessary to fund the transaction. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the buyer 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 value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from AppraisalsByDana, LLC. will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at AppraisalsByDana, LLC. is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, 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 property.

Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we gather information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • But, 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.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Atlanta and Fulton, AppraisalsByDana, LLC. can't be beat. This approach to value is usually awarded 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 real estate. In this case, the amount of income the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not always what's being paid for the property 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'. Regardless, 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 sell the property again. The bottom line is, an appraiser from AppraisalsByDana, LLC. will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.