Brock Appraisal Company, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraiser provides an evaluation that generates an opinion of value. This opinion or estimate is arrived at by a formal method that generally utilizes three "common approaches to value". One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves finding similar houses in the vicinity and discerning value based on comparing those prior sales to the property being investigated. Being the most popular approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residential property. The third approach is the Income Approach, which is the best method in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.
What does an appraiser do?(Back to top) An appraiser forumlates a professional, unbiased assessment of market value, often in the context of a real estate sale. Appraisers present their conclusions in appraisal reports.
What are the reasons I would request your services?(Back to top) There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal include:
Is an appraisal the same as a home inspection? (Back to top)Home inspectors do not estimate an opinion of value and do not do appraisal reports. The point of a home inspection is to evaluate the structure of the home from foundation to attic. The general home inspector's report will contain an evaluation of the condition of the house's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) To be blunt, it's like comparing opera to country. The CMA uses market trends to create most of their business. Appraisals use comparable sales which are valid resources. Area and building costs are also important in an appraisal. All a CMA does is generate a "ball park 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 most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an independent voice, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the price of the home.
What's in an appraisal report? (Back to top)Each appraisal must reflect a believable estimate of value and must clearly state the following:
After completing the appraisal, what assurance is there that the value indicated is legitimate?(Back to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Back to top) Typically, appraisers are employed by lenders to render a value opinion on real estate involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Saunders County or other areas?(Back to top) One of the most important activities of an appraiser is to assimilate data. Data can be divided into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a numerous sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often need to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And last but not least, the appraiser assimilates general data from his or her past experience in creating appraisals for other houses in the same market.
What can a full appraisal do for me?(Back to 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 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. A home 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?(Back to top) PMI is short for for Private Mortgage Insurance. This additional policy protects the lender in case a borrower defaults 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?(Back to top) The first step in most appraisals is the home inspection. 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 amenities. Inside, pick up any clutter and make sure we can get to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Back to top) For mortgage transactions, the lender orders 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 certainly 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may define the purpose of the appraisal; 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.
Which home renovations add the most to the price?(Back to top) It really depends on the market. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI from renovating a home comes in the kitchen. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms were second, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.