What Are the Components of an Appraisal?

Acquiring real estate is the largest financial decision some people will ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.

Practically all the participants are quite familiar. The real estate agent is the most familiar face in the transaction. Next, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all aspects of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.

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So, who makes sure the value of the real estate is in line with the purchase price? 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 GA Department of Audits will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

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

Cost Approach

Here, the appraiser gathers information on local building costs, the cost of labor and other factors to calculate how much it would cost to construct a property comparable to the one 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.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They thoroughly 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. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter 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.

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 putting a value on features of homes in Atlanta and Fulton, GA Department of Audits can't be beat. This approach to value is most often given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the real estate generates is factored in with income produced by nearby properties to determine the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 GA Department of Audits will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.