Applied Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraisal is an investigation allowing the appraiser to come to an opinion of value. This opinion or estimate is figured using a formal process that generally utilizes the three main "common approaches to value". One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach involves finding comparable homes nearby and finding value based on comparing those houses to the home in question. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. One of the least common approaches in appraising houses is the Income Approach, which is mainly used to figure the market value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(Back to top) An appraiser provides a fair and credible opinion of market value, often in the context of a real estate sale. Appraisers exhibit their expert findings in appraisal reports.
What would cause me to need a real estate appraisal?(Back to top) There are many reasons to purchase an appraisal from Applied Appraisals with the most common reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
How is an appraiser different than a home inspector? (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 investigate the structure of the home from bottom to top. The standard house inspector's report will include 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 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)?(Back to top) To be honest, they share nothing in common. The CMA uses market trends to create most of their business. The appraisal relies on similar proven comparable sales. Location and building values are also important in an appraisal. 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 largest differentiator is the person creating the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. A certified, Pennsylvania licensed professional who made their livelihood on valuing homes in and around Beaver County creates the appraisal. Further, the appraiser is an independent voice, with no conditional interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.
What can I expect to see in my appraisal report? (Back to top)The main point of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
After completing the appraisal, how can I have certainty that the value indicated is valid?(Back to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who do appraisers work for?(Back to top) Mortgage lenders are an appraiser's most likely client, needing their services to ensure property 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 Beaver County or other areas?(Back to top) Collecting data is one of the primary tasks an appraiser performs. Data can be categorized as either Specific or General. Specific data is 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 variety of places. To look up recent sales to be used as "comps", we typically use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is available 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 past experience in doing assignments for other houses in the same market.
Why do I need a professional appraisal?(Back to top) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to figure out 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, you can avoid overpaying by commissioning 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. 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 an acronym for Private Mortgage Insurance. It takes care of the lender if a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes 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.
How do I get ready for the appraiser?(Back to top) We start 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 we have easy access to the exterior of the house . Trim any landscaping 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.
To help speed things along plus ensure a more accurate report, try if possible to have the following items:
Define "Market Value"(Back to top) In real estate appraising, Market Value is commonly defined as:
Who actually owns 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 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 situations, 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.
Which home renovations add the most to the price?(Back to top) The answer to this is different depending upon the location of the home. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
As a rule, the most value returned from renovating a home comes in the kitchen. 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, yielding 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.