What is an appraisal?A home purchase can be the most important investment some people could ever consider. Whether it's a primary residence, an additional vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the transaction. Ensuring all details of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So what party makes sure the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Texas licensed appraiser from Shirley E. Mitchell Real Estate Appraisals will ensure you as an interested party are informed.
Appraisals begin with the home inspectionOur first task at Shirley E. Mitchell Real Estate Appraisals is to inspect the property to determine 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 indeed exist and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where the appraiser uses information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Sales ComparisonAppraisers can tell you a lot about the subdivisions in which they appraise. We innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third way of valuing real estate. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value ConclusionCombining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. 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 market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But 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 the event they had to sell the property again. At the end of the day: An appraiser from Shirley E. Mitchell Real Estate Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.