Brooks Appraisal Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) An appraisal is an estimation leading to an opinion of value. The appraiser must use a number of "approaches," typically three, to draw up the estimation of market value. One of the three is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach involves finding comparable properties in the vicinity and discerning value based on making a comparison of those properties to the property being appraised. The Sales Comparison Approach is commonly the most definitive and clearest indicator of value for a home. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money produced by the property.
What does an appraiser do?(Go to list of questions) An appraiser forumlates a professional, unbiased determination of market value, in the support of real property transactions. Appraisers document their analysis in appraisal reports.
Why would someone request your services?(Go to list of questions) There are a lot of reasons to purchase an appraisal from Brooks Appraisal Services with the usual reason being real estate and mortgage transactions. A few other reasons for getting an report include:
How is an appraisal different than a home inspection? (Go to list of questions)Appraisers do not do perform residential property inspections and are not home inspectors. A third-party home inspector will investigate the structure of the home, from the top 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 services, 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 visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Go to list of questions) Simply, they have nothing in common. The CMA utilizes market trends to generate most of their business. The appraisal is reliant on similar proven comparable sales. In addition, the appraisal verifies other factors like condition, neighborhood and replacement costs. 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 who's 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 produce by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an unbiased voice, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the value of the home.
What can I expect to see in my appraisal report? (Go to list of questions)The main objective of an appraisal document is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
Upon completion of the appraisal, how can I have a guarantee that the value indicated is accurate?(Go to list of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who do appraisers work for?(Go to list of questions) Mortgage lenders are an appraiser's most likely client, requesting their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Madison County or other areas?(Go to list of questions) One of the primary things an appraiser does is to collect property data. Data can be classified as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood product.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
How can a licensed appraiser help me?(Go to list of questions) If you're making some sort of financial decision and the value of your home matters, you'll want an appraisal. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. 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 house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Go to list of questions) PMI stands for Private Mortgage Insurance. It guards the lender in case a borrower defaults on the loan and the market price of the property 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.
Does the appraiser need anything from the homeowner in advance?(Go to list of questions) We begin 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. On the home's interior, make sure it is clutter free and that we can access 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.
To help speed things along plus ensure a more accurate report, try if possible to have the following items:
What is "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 bundled 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 do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Go to list of questions) 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. 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 weren't far behind, returning 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.