The Appraisal Connection Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraisal report is an investigation leading to an opinion of value. The appraiser must use a several "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the approaches that appraisers use to find the value of a home; it involves concluding what the improvements would cost less physical deterioration, plus the land value. Easily the most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which deals with concluding a comparison to comparable houses nearby. The Sales Comparison Approach is commonly the most definitive and best indicator of value for a home. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the money produced by the property.
Describe what an appraiser does(Return to top) An appraiser provides an unprejudiced and well justified assessment of market value, to be used in making real estate transactions. Appraisers demonstrate their findings in appraisal reports.
Why would I request services from The Appraisal Connection Inc.?(Return to top) There are a lot of reasons to purchase an appraisal from The Appraisal Connection Inc. with the usual reason being real estate and mortgage transactions. A few other reasons for obtaining an report include:
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Honestly, they have nothing in common. The CMA relies on indistinct local market trends. The appraisal relies on similar verifiable comparable sales. Also, the appraisal checks other factors like condition, area and building costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
The person behind the report is hands down the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. 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 accept a previously agreed upon sum for assignments, regardless of their value conclusion.
What's in an appraisal report? (Return to top)The main purpose of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
Upon completion of the report, how can I have certainty that the value conclusion is legitimate?(Return to top) In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers?(Return to top) Typically, appraisers are hired by lenders to render a value opinion on a home involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Kaufman County or other areas?(Return to top) Gathering data is one of the primary tasks an appraiser does. Data can be classified as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a variety of places. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Return to top) An appraisal is a valuable tool whenever the value of your home is pertinent to a financial decision. For those selling a home, you'll want to determine the 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, be sure you're not overpaying by getting 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.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. PMI guards the lender if a borrower doesn't pay on the loan and the market price 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.
Does the appraiser need anything from the homeowner in advance?(Return to top) We start 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access appliances 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:
Define "Market Value"(Return to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Return to top) 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 report - it's usually included with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner engages an appraiser directly. In these situations, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(Return to top) It really depends on the market. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
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 increase your value would be painting just for the sake of redecorating.