Understanding the Appraisal Process

Acquiring real estate is the largest transaction most might ever make. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.

The majority of the people participating are quite familiar. The most known person in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the transaction. And the title company makes sure that all details of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, who's responsible for making sure the property 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Donald W. WIlliams, Sr. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at Donald W. WIlliams, Sr. is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we use information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property 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.

Paired Sales Analysis

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

For example, if the comparable has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system 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. At Donald W. WIlliams, Sr., we are experts when it comes to knowing the value of real estate features in McDonough and Henry County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along 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 subject property. 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 a property's valueDepending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Donald W. WIlliams, Sr. will help you discover the most accurate property value, so you can make profitable real estate decisions.