Karen M Strong has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) The method of producing an appraisal consists of an evaluation which leads to an opinion of value. There are three "common approaches to value" which assists the appraiser arrive at this opinion or valuation. One of the processes is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, plus the land value. Easily the most common approach in finding the likely sales price of a house is the Sales Comparison Approach which concerns concluding a comparison to comparable properties nearby. The Sales Comparison Approach is commonly the most definitive and best indicator of value for a residential property. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
What does an appraiser do?(See list of FAQ's) An appraiser forumlates a professional, unbiased assessment of market value, in the support of real estate exchanges. Appraisers demonstrate their professional findings in appraisal reports.
What are the reasons someone would require your services?(See list of FAQ's) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)Appraisers do not do perform house inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the home from basement to rooftop. Commonly, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible 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)?(See list of FAQ's) To be blunt, it's like comparing Shakespeare to reality TV. The CMA uses market trends to generate most of their business. An appraisal is based on comparable sales that can be proven by public record. In addition, the appraisal verifies other factors like condition, neighborhood and construction prices. 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.
But the most significant factor is who's creating the report. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, state licensed professional who bases a career on valuing properties in and around Tulare County creates the appraisal. Further, the appraiser is an independent voice, with no vested interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.
What does the appraisal report contain? (See list of FAQ's)Every report must demonstrate a credible estimate of value and should identify the following:
Once the assignment has been completed, what guarantee is there that the final number is accurate?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(See list of FAQ's) Mortgage lenders are an appraiser's typical customer, requesting their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does an appraiser get the information used to estimate values in Tulare County or other areas?(See list of FAQ's) Compiling data is one of the primary occupations of an appraiser. Data can be described as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a number of sources. To research recent sales to be used as "comps", we typically use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser?(See list of FAQ's) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. 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. 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.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. This supplemental policy protects the lender if a borrower defaults on the loan and the market price of the home 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.
Should I do anything in advance of the appraisal inspection(See list of FAQ's) 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 . Trim any shrubs and move any items that would get in our way while we measure the structure. Indoors, make sure we can get to appliances 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:
How does an appraiser define "Market Value"?(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(See list of FAQ's) For mortgage transactions, the lender orders 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 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may define 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?(See list of FAQ's) The answer to this is different depending upon the location of the home. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.