APPRAISALS "R" US has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Go to list of questions) An appraisal report is an investigation allowing the appraiser to come to an opinion of value. This opinion or estimate is figured by using a formal method that typically uses three "common approaches to value". One of the methods in use is the Cost Approach, which is what it would cost to restore the improvements to the home, less the age and physical dilapidation, adding the land value. The Sales Comparison Approach deals with searching for similar properties nearby and discovering the value based on comparing those prior sales to the home being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. The Income Approach is mainly used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
Describe what an appraiser does(Go to list of questions) An appraiser provides a fair and credible opinion of market value, in the support of real property transactions. Appraisers show their expert conclusions in appraisal reports.
Why would a person request your services?(Go to list of questions) There are a lot of reasons to order an appraisal from APPRAISALS "R" US with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal include:
How is an appraiser different than a home inspector? (Go to list of questions)Appraisers do not do perform residential property inspections and are not home inspectors. An inspection is a third-party investigation of the available structure and appliances of a property, from the roof to the foundation. For the most part, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed 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) To be blunt, it's apples and oranges. The CMA depends on indistinct local market trends. An appraisal utilizes comparable sales that can be validated by records. The appraisal report will also include location and building values. 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 person creating the report is frankly the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. A certified, state licensed professional who bases their livelihood on valuing homes in and around Orange County creates the appraisal. Further, the appraiser is an unbiased party, with no vested interest in the value conclusion, unlike the real estate agent, who gets a commission based upon the price of the home.
What are the contents of an appraisal report? (Go to list of questions)Every report must indicate a supported value opinion and should document the following:
Once the appraisal has been delivered, how can I have assurance that the final number is valid?(Go to list of questions) In communicating an appraisal report, each appraiser must ensure the following:
Who are an appraiser's customers?(Go to list of questions) Mortgage lenders are an appraiser's typical customer, using their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Orange County or other areas?(Go to list of questions) One of the most important activities of an appraiser is to collect property data. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is received from a numerous places. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Appraisers routinely need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Go to list of questions) 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 will help you determine the most appropriate price. 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 home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Go to list of questions) PMI is short for for Private Mortgage Insurance. PMI protects the lender if a borrower doesn't pay on the loan and the value of the house is less than the loan balance. 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 start 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 status of its features. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access items like furnaces and water heaters.
You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
Define "Market Value"(Go to 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?(Go to list of questions) In most real estate transactions, the appraisal is ordered by the lender. 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 certainly entitled to a copy of the appraisal - 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.
The exception to this rule is when a home owner hires 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 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) It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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, work that may not add value would be painting just for the sake of redecorating.