What Goes Into an Appraisal?
Buying a house is the most serious financial decision most of us may ever make. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to see it through.
The majority of the parties participating are very familiar. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the financial capital required to bankroll the exchange. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who makes sure the property is worth the amount being paid? In comes the appraiser. 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 Miller Property Consultants, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must physically 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 shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Back at the office, 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.
This is where the appraiser gathers information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit 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 communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
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 Miller Property Consultants, LLC, we are an authority when it comes to knowing the value of real estate features in Lilburn and Gwinnett County neighborhoods. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by nearby properties to determine the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. 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 the event they had to put the property on the market again. The bottom line is, an appraiser from Miller Property Consultants, LLC will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.