Appraisal Group has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Go to list of questions) The procedure of performing an appraisal report consists of an estimation which forms an opinion of value. The real estate appraiser will use a few "approaches," typically three, to draw up the estimation of market value. One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the house, minus age and physical deterioration, plus the land value. Another of the methods is the Sales Comparison Approach - which concerns finding a comparable analysis to other similar properties within a close vicinity which have recently sold. Being the most common approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a residential property. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the income generated by the property.
What does an appraiser do?(Go to list of questions) An appraiser generates a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers present their analysis in appraisal reports.
What would cause me to request services from Appraisal Group?(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 getting an report include:
Is an appraisal the same as a home inspection? (Go to list of questions)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. An inspection is a third-party evaluation of the available structure and systems of a home, from the roof to the foundation. Commonly, a home inspection report will evaluate the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, 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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Go to list of questions) Frankly, they share nothing in common. What the CMA depends on are ill-defined trends. The appraisal relies on specific definite comparable sales. The appraisal report will also contain neighborhood and building values. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
Who's creating the report is actually the biggest difference between a CMA and an appraisal. 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. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for work they perform, regardless of their outcome.
What are the contents of an appraisal report? (Go to list of questions)The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
Upon completion of the report, what guarantee is there that the value indicated is valid?(Go to list of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Go to list of questions) Typically, appraisers are called upon by lenders to estimate the value of a house involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Dallas County or other areas?(Go to list of questions) Gathering information is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is gathered from a numerous sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(Go to list of questions) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, 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?(Go to list of questions) PMI stands for Private Mortgage Insurance. This additional plan guards the lender if a borrower doesn't pay on the loan and the value of the home 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.
Should I do anything in advance of the appraisal appointment(Go to list of questions) The first step in most appraisals is the property inspection. During this process, we 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. 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 relocate any items that would make it difficult to 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 accuracy of the appraisal report by having the following things on hand:
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) In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is entitled to a copy of the appraisal - it's usually bundled 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 scenarios, the appraiser may stipulate the purpose of the appraisal; 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.
I want to get more for my house. Where should I spend money renovating?(Go to list of questions) It really depends on the market. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI 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 are right up there with kitchens, returning 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.