Frequently Asked Questions Regarding Valuation

What is an appraisal?
 
An appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three ''common approaches to value''. They are the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Sales Comparison Approach - which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property.
 
What are the types of Value? 

Appraisals are done to derive to different kinds of value such as Market Value, Liquidation Value, Value in Use, Insurance Value, etc.
 
What's market value?

The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what they consider their best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
 
What's Cost Approach?

Under the cost approach, the value of a property is estimated by determining what it would cost to rebuild the property and then applying appropriate adjustments for depreciation and obsolescence. We carefully examine "physical, functional, or economic obsolescence that may have impact on the value of the subject property." Physical obsolescence is a loss in value for a property due to mismanagement or neglect, usually resulting in deferred maintenance. Functional obsolescence is a loss in value for a property due to functional inadequacies or superadequacies. These functional inadequacies typically include design factors. Economic obsolescence, sometimes called external obsolescence, is a loss in value for a property due to external factors not involving the property itself. The underlying theory of the cost approach is that a buyer would not pay more for a property than it would cost to build or to acquire essentially the same property.
 
What's Sales Comparison Approach?

The Sales Comparison Approach derives a value indication by comparing the subject being appraised to similar properties that have sold recently.  It is based upon the theories of supply and demand, balance, and substitution. The theory of substitution holds that the value of a property replaceable in the market tends to be set by the cost of acquiring an equally desirable "substitute" property. The sales comparison approach relies upon development of a value estimate from prices paid in the open market for properties with adequate exposure to ensure that the prices represent fair market value.  The appraiser analyzes  market sales quantitatively, qualitatively, or both in deriving a value indication.
 
What's Income Approach?

Income Capitalization is a valuation method appraisers and real estate investors use to estimate the value of income producing real estate. It is based upon the premise of anticipation i.e., the expectation of future benefits. Under the income approach, the value of property is estimated based on the income that the property can be expected to generate. Income capitalization converts anticipated cash flows into present value by "capitalizing" net operating income by a market derived "capitalization rate". A capitalization rate is a rate of return on investment It is used by real estate investors as a benchmark for determining how much they should pay for a property. It is to be noted that in certain cases any of the approaches mentioned above may be deemed inapplicable due to the nature of the property appraised. This is typical and is not considered to be a departure from appraisal standards.
 
What does an appraiser do?

An appraiser provides a professional, unbiased opinion of value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports.
 
Why would a person need an appraisal?  

There are many reasons with the most common being real estate and mortgage transactions. Often times when the value of a real estate property is being used to make a significant financial decision, an appraisal is needed. If you're selling your home, an appraisal helps you set the most appropriate value. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement   or divorce, it ensures that property is divided fairly. Appraisal is often requested for reevaluation of assets for tax purposes or establishment of the replacement cost of insurance.


Appraisals are invaluable to INVESTORS:
When making investments in real estate, sound investors always order an appraisal to make sure the price they are paying is right or use it for negotiating tool.  The appraiser does a thorough analysis of the market information and helps identify negative factors that may be affecting the marketability of the subject property.


Appraisals are invaluable to  DEVELOPERS:
Appraisers help developers with the highest and best use decision of the land so that the development makes optimal use of the land to achieve maximum profit.


What's highest and best use?
Highest and Best use is the most probable use of land or improved property that is legally possible, physically possible, financially feasible (and appropriately supportable) from the market, and which results in maximum profitability. Highest and best use involves two considerations: [1] the most likely and profitable use of the site "as if vacant" under the requirements set forth above and, [2] if a property is "already improved", it is the use that should be made of the property to maximize value for non-income producing properties or, maximize net operating income on a long range basis for investment properties. In cases where capital expenditure is necessary to renovate or improve an income producing property, these costs must provide a sufficient rate of return (to the owner) for the total amount invested in the site and building improvements.

Does an appraiser engage in property inspection?
The appraiser is not a property inspector which means an inspection of the accessible structure and mechanical systems of a house, from the roof to the foundation. The standard property inspector's report will include an evaluation of the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure. An appraiser evaluates marketability of a property, analyzes market data and economic factors that affect the value of a property.

 

What's the difference between an appraisal that an agent performs and our appraisal?
Simply put, the difference is night and day. The agent relies on vague market trends. The appraisal relies on specific, verifiable comparable sales and in depth analysis of all the factors that are relevant in the valuation of the property. In addition, our appraisers who are licensed or certified professionals,  deliver a defensible and carefully documented opinion of value prepare valuation reports by international valuation standards using the valuation methodology recognized around the world. A report  created by a real estate agent does not have a true grasp of the market or valuation concepts, accordingly their reports can often times be misleading or not in line with accepted standards of valuation.


What does an appraisal report contain?    
Each report must reflect a credible estimate of value and must identify the following:
The client and other intended users.
The intended use of the report.
The purpose of the assignment.
The type of value reported and the definition of the value reported.
The effective date of the appraiser's opinions and conclusions.
Relevant property characteristics, including location attributes, physical attributes, legal attributes, economic attributes, the real property interest valued, and Non real estate items included in the appraisal, such as personal property, including trade fixtures and intangible items.
All known: easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
Division of interest, such as fractional interest, physical segment and partial holding.
The scope of work used to complete the assignment.

 

Are appraisers certified?  
Valuation profession is in its infancy in Georgia. There is no licensing agency that would regulate the appraisal sector yet. However, Paragon appraisers are licensed and certified from U.S. appraisal licensing board and are trained to render an unbiased opinion based upon extensive education and experience requirements. In U.S. to become licensed or certified, appraisers must fulfill rigorous education and experience requirements and abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP). Licensing in the U.S. is associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, he or she is required to take continuing education courses in order to keep the license current.


Currently, APLR has launched real estate appraiser certification program which has received ISO accreditation. The program is sponsored by USAID. APLR is actively engaged in the process of changing the law to make certified real estate appraisers the only parties to perform real estate property valuation.

 

Where does an appraiser get the information used to estimate value?
Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the property itself. Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection. Legal information on the property along with the cadastre map  is obtained from County Records.


We heavily invest in property sales information which constitutes the quality of our appraisal reports. In addition, general data is gathered from a number of sources, agents, brokers, brokerage companies, owners, newspapers, online property databases that provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.


 
How can I make sure it is held confidential?
All our reports are held confidential. We strictly obey the code of ethics and keep privacy of our reports. 
How do I get ready for the appraiser?
The first step in most appraisals is the property inspection. During this process, the appraiser will come to the property and measure it, determine the layout of the space and all aspects of the property's general condition, and take several photos of your property for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house. The following Items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Architectural plans of the property
County records documents showing the legal description including the cadastre map.
Rental agreements if applicable

 

How do I get ready for the appraiser?
The first step in most appraisals is the property inspection. During this process, the appraiser will come to the property and measure it, determine the layout of the space and all aspects of the property's general condition, and take several photos of your property for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house. The following Items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:

Architectural plans of the property
County records documents showing the legal description including the cadastre map.
Rental agreements if applicable

 

What is the fee?
FEES:  The "appraisal and related fees" charged are subject to several factors including the complexity of the appraisal problem, the type of property, the purpose of the appraisal, and the use of the report" Out of area assignments require additional time to meet with local appraisers, brokers, and city officials to gather specific area and market data.

 


What's turn time?
Turn-time depends on the complexity of the appraisal. We can assure you that our turn-times are most competitive in the market and as our slogan conveys: with us "promises kept, deadlines met".

 

How can I order?
You can call us, or email us with your request for valuation.
Looking forward to hearing from you!