Paul R. Henry Real Estate Appraisal has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(List of questions) The process of creating an appraisal deals with an estimation which leads to an opinion of value. This opinion or estimate is found through the use of a formal method that generally utilizes three "common approaches to value". One of the methods 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 most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which involves figuring a comparison to similar houses nearby. The Sales Comparison Approach is normally the most definitive and best indicator of a liklely sales price for a residence. The Income Approach is generally used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.
What does an appraiser do?(List of questions) An appraiser produces an unbiased and well substantiated opinion of market value, in the support of real estate exchanges. Appraisers summarize their professional analysis in appraisal reports.
What would cause me to need your services?(List of questions) There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:
How is an appraiser different than a home inspector? (List of questions)Appraisers do not do perform home inspections and are not home inspectors. The purpose of a home inspection is to investigate the structure of the property from basement to rooftop. Commonly, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(List of questions) To be blunt, it's like comparing opera to country. The CMA utilizes market trends to create most of their business. An appraisal utilizes comparable sales that can be verified by public record. Also, the appraisal verifies other factors like condition, area and building prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The person creating the report is hands down the biggest difference between a CMA and an appraisal. 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 has made a career out of valuing properties. Further, the appraiser is an independent party, with no vested interest in the value of a home, unlike the agent, whose income is tied to the price of the home.
What can I expect to see in my appraisal report? (List of questions)The main objective of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the assignment has been delivered, how can I have certainty that the value indicated is veritable?(List of questions) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(List of questions) Mortgage lenders are an appraiser's typical client, requesting their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Catawba County or other areas?(List of questions) Gathering information is one of the main things an appraiser does. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a variety of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. To double-check actual sales prices, we research tax records and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(List of questions) An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. For those selling a home, you'll want to figure out a price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(List of questions) PMI stands for Private Mortgage Insurance. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower 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?(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. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
Define "Market Value"(List of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(List of questions) In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is entitled to a copy of the report - it's usually included with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may stipulate the purpose of the appraisal; 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.
I want to get more for my house. Where should I spend money renovating?(List of questions) It really depends on the market. 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 move. 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 weren't far behind, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.