Appraiser has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Go to list of questions) The process of producing an appraisal report deals with an evaluation which leads to an opinion of value. The appraiser will typically use a few "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves finding what the improvements would cost without physical deterioration, adding the land value. The most common approach in finding the likely sales price of a house is the Sales Comparison Approach which concerns making a comparison to similar homes nearby. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(Go to list of questions) An appraiser offers an unbiased and well substantiated assessment of market value, often in the context of a real estate purchase. Appraisers exhibit their analysis in appraisal reports.
Why would I need a real estate appraisal?(Go to list of questions) There are many reasons to obtain an appraisal from Appraiser with the usual reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal include:
How is an appraiser different than a home inspector? (Go to list of questions)The appraiser is not a home inspector and does not do a comprehensive home inspection. A third-party home inspector will evaluate the structure of the house, from the top to the foundation. Usually, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Go to list of questions) Simply put, it's like comparing broadband and dial-up. The CMA relies on indefinite market trends. The appraisal depends on similar definite comparable sales. In addition, the appraisal verifies other factors like condition, location and construction prices. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is the person behind the report. A CMA is written 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 - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for work they perform, regardless of their outcome.
What's in an appraisal report? (Go to list of questions)Each report should reflect a believable value opinion and should identify the following:
After completing the report, what assurance is there that the final number is accurate?(Go to list of questions) In communicating an appraisal report, each appraiser must make sure of the following:
Who do appraisers work for?(Go to list of questions) Commonly, appraisers are called upon by mortgage lenders to estimate the value of a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does Appraiser get the information used to estimate values in Tom Green County or other areas?(Go to list of questions) Gathering information is one of the main tasks an appraiser engages in. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is gathered from a numerous places. To research recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To double-check actual sales prices, we research items in the assessor's office and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.
What can a full appraisal do for me?(Go to list of questions) An appraisal is a valuable tool whenever your home's value is relevant to a financial decision. For those selling a home, you'll want to figure out a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. 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. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Go to list of questions) PMI stands for Private Mortgage Insurance. This added plan takes care of the lender if a borrower is unable to pay on the loan and the market price of the home is less than what is owed on the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
How do I get ready for the appraiser?(Go to list of questions) We begin with an inspection of the home. 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 landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What does "Market Value" mean?(Go to list of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Go to list of questions) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the report - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Go to list of questions) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the best ROI 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%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.