All About Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Top) The method of performing an appraisal report deals with an estimation which leads to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or valuation. One of them is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves finding similar properties nearby and finding value based on making a comparison of those properties to the house in question. The Sales Comparison Approach is commonly the most definitive and best indicator of a liklely sales price for a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.
What does an appraiser do?(Top) An appraiser forumlates a fair and credible opinion of market value, often in the context of a real estate purchase. Appraisers document their findings in appraisal reports.
Why would a person require your services?(Top) There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Frankly, it's like comparing sugar and saccharin. The CMA utilizes market trends to generate most of their business. The appraisal is based on specific verifiable comparable sales. Also, the appraisal checks other factors like condition, neighborhood and construction prices. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The credentials of the person creating the report is actually the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for work they perform, regardless of their value conclusion.
Once the assignment is done, what assurance is there that the final number is valid?(Top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Top) Mortgage lenders are an appraiser's most likely client, requiring their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does All About Appraisals get the data used to estimate values in Weld County or other areas?(Top) One of the main things an appraiser does is to compile data. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a many places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(Top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Top) PMI is the common abbreviation for for Private Mortgage Insurance. This added policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Does the appraiser need anything from the homeowner in advance?(Top) We begin with an inspection of the property. What this entails is the appraiser, after setting up an appointment, personally going through the home - recording the layout of the rooms, taking photos and documenting the general condition of its features. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access appliances like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(Top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Top) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is entitled to a copy of the appraisal - it's usually bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Top) The answer to this is different depending upon the location of the home. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
As a rule, the most value returned from renovating a home comes in the kitchen. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.