Their home's purchase is the largest financial decision most of us will ever encounter. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
Most of the parties involved are quite familiar. The real estate agent is the most known entity in the transaction. Then, the bank provides the money required to fund the deal. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, 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.
Appraisals begin with the property inspection
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, 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 use information on local building costs, the cost of labor and other elements to calculate how much it would cost to build a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the communities in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Mitchell Appraisals, we are an authority in knowing the worth of particular items in Navarre and Santa Rosa County neighborhoods. This approach to value is commonly given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a measurable number of rental properties. In this scenario, the amount of income the real estate generates is factored in with income produced by similar properties to determine the current value.
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual situations 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.But the appraised value is typically 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 sell the property again. At the end of the day, an appraiser from Mitchell Appraisals will help you discover the most accurate property value, so you can make the most informed real estate decisions.