The Appraiser Group Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The procedure of writing an appraisal consists of an investigation which forms an opinion of value. There are three "common approaches to value" which helps the appraiser arrive at this opinion or valuation. The Cost Approach is one of the approaches that real estate appraisers use to find the value of a house; it involves figuring what the improvements would cost without physical degradation, adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns discovering a comparison to other similar properties within a close proximity which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of 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 income generated by the property.
What does an appraiser do?(Return to top) An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers present their analysis in appraisal reports.
What would cause me to need your services?(Return to top) There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal include:
How is an appraisal different than a home inspection? (Return to top)Home inspectors do not figure out an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the livable structure and electrical and mechanical systems of a property, from the top to the foundation. The usual house inspector's report will include an evaluation of the condition of the house's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) To be honest, they share nothing in common. The CMA utilizes market trends to conduct most of their business. An appraisal relies on comparable sales that can be verified by records. In addition, the appraisal verifies other factors like condition, neighborhood and construction costs. 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.
But the most significant factor is the person creating the report. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an independent party, with no vested interest in the value conclusion, unlike the agent, who gets a commission based upon the value of the home.
What's in an appraisal report? (Return to top)Each appraisal must reflect a believable value opinion and must document the following:
After completing the appraisal, what guarantee is there that the final number is trustworthy?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Return to top) Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure property 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 The Appraiser Group Inc. get the data used to estimate values in Pike County or other areas?(Return to top) One of the primary activities of an appraiser is to assimilate data. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a many sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To double-check actual sales prices, we use tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why do I need a professional appraisal?(Return to top) An appraisal is a valuable tool anytime the value of your home is relevant to some financial decision. For those selling a home, you'll want to determine 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from The Appraiser Group Inc. is the best documentation to ensure assets are divided evenly. 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?(Return to top) PMI is an acronym for Private Mortgage Insurance. This supplementary plan takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Do you need anything from the homeowner in advance?(Return to 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 landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can easily access appliances like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report?(Return to 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.
This rule doesn't apply when a home owner engages an appraiser directly. In these scenarios, the appraiser may stipulate 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 use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Return to top) A home's location - what city it is in and even what part of that city - is key to this popular question. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 were second, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.