Decoding the Appraisal Process
A home purchase is the biggest transaction many people could ever make. It doesn't matter if a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the mortgage company provides the money needed to bankroll the exchange. And ensuring all requirements of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, what party makes sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Mitchell Appraisals will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Mitchell Appraisals is to inspect the property to ascertain its true status. We must see features 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 reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look 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.
Here, we analyze information on local construction costs, the cost of labor 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.
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject property.
A true estimate 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 valuing features of homes in Navarre and Santa Rosa, Mitchell Appraisals is second to none. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the property generates is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. At the end of the day, an appraiser from Mitchell Appraisals will help you attain the most accurate property value, so you can make profitable real estate decisions.