Appraisal Solutions has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) The method of performing an appraisal deals with an evaluation which forms an opinion of value. The appraiser must use a few "approaches," typically three, to conclude the estimation of market value. One of the methods is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with searching for comparable homes in the vicinity and finding value based on making a comparison of those houses to the house being appraised. Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a house. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the income produced by the property.
What does an appraiser do?(Return to top) An appraiser provides a fair and credible determination of market value, often in the context of a real estate exchange. Appraisers show their conclusions in appraisal reports.
What are the reasons a person would need services from Appraisal Solutions?(Return to top) There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
How is an appraisal different than a home inspection? (Return to top)Home inspectors do not provide an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to investigate the structure of the property from foundation to top. 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 capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) To be blunt, it's like comparing sugar and saccharin. What the CMA relies upon are ill-defined trends. An appraisal utilizes comparable sales that can be validated by public record. In addition, the appraisal verifies other factors like condition, location and construction prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
Who's behind the report is actually the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, Illinois licensed professional who has formed their livelihood on valuing homes in and around Madison County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (Return to top)The main objective of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
After completing the appraisal, what assurance is there that the value conclusion is veritable?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Return to top) Mortgage lenders are an appraiser's typical customer, requesting their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the information used to estimate values in Madison County or other areas?(Return to top) One of the main tasks an appraiser performs is to assimilate property data. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is received from a many sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Appraisers routinely have 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 service.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal?(Return to top) An appraisal is a worthwhile anytime your home's value is relevant to a financial decision. If you're selling your home, an appraisal will help you determine 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. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Return to top) PMI is short for for Private Mortgage Insurance. This additional plan guards the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan. 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.
Do you need anything from the homeowner in advance?(Return to top) The first step in most appraisals is the home inspection. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. On the home's interior, make sure it is clutter free and that we can get to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside walls.
To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(Return to top) 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 included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, 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.
How can I get the most ROI out of home improvements?(Return to top) The answer to this is different depending upon the location of the home. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 were second, yielding 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.