Professional Appraisals, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) The procedure of performing an appraisal consists of an estimation which leads to an opinion of value. There are three "common approaches to value" which helps the appraiser conclude this opinion or estimate. The Cost Approach is one of the methods that appraisers use to find value; it involves concluding what the improvements would cost less physical degradation, adding the land value. The Sales Comparison Approach involves searching for similar properties in close proximity and discovering the value based on comparing those prior sales to the property being investigated. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising homes is the Income Approach, which is generally used to find the market value of a property based on what an investor would pay based on the capital produced by the property.
What does an appraiser do?(Go to list of questions) An appraiser provides a fair and credible assessment of market value, often in the context of a real estate purchase. Appraisers illustate their expert findings in appraisal reports.
What would cause me to need a real estate appraisal?(Go to list of questions) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
How is an appraisal different than a home inspection? (Go to list of questions)Appraisers do not do complete residential property inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the property, from the roof to the foundation. Commonly, a home inspection report will discuss the amenities and the necessities 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, accessible 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 honest, they have nothing in common. What the CMA depends on are ill-defined trends. The appraisal is based on specific proven comparable sales. In addition, the appraisal checks other factors like condition, area and replacement 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 largest differentiator is the person behind the report. Real estate agents produce 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 unbiased voice, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.
What's in an appraisal report? (Go to list of questions)Every appraisal must reflect a credible estimate of value and should identify the following:
Upon completion of the appraisal, how can I have certainty that the value conclusion is legitimate?(Go to list of questions) In communicating an appraisal report, each appraiser must ensure the following:
Who hires an appraiser?(Go to list of questions) Most of the time, appraisers are called upon by mortgage lenders to render a value opinion on real estate involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Professional Appraisals, Inc. get the information used to estimate values in Lake County or other areas?(Go to list of questions) One of the main activities of an appraiser is to compile property data. 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 while on site.
General data is received from a variety of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. To verify actual sales prices, we look at items in the assessor's office and other public documents. 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?(Go to list of questions) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. For those selling a home, you'll want to determine the 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. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Professional Appraisals, Inc. is the best documentation to ensure assets are divided properly. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. This supplemental plan protects the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Do you need anything from the homeowner in advance?(Go to list of questions) 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 status of its amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any shrubs and relocate any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can easily access items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser 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) For mortgage transactions, the lender requests 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 entitled to a copy of the appraisal - 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.
The exception to this rule is when a home owner hires an appraiser directly. In these scenarios, the appraiser may state how the appraisal can be used; 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.
How can I get the most ROI out of home improvements?(Go to list of questions) Like all things real estate, this is dependent on a home's location. 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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.