AFR Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The method of creating an appraisal deals with an estimation which leads to an opinion of value. This opinion or estimate is discerned through a formal process that typically uses three "common approaches to value". The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves discerning what the improvements would cost less physical degradation, plus the land value. Another of the processes is the Sales Comparison Approach - which deals with discovering a comparable analysis to other similar properties within a close vicinity which have recently sold. Being the most commonly used approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to determine the value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(See list of FAQ's) An appraiser produces an unbiased and well substantiated determination of market value, often in the context of a real estate purchase. Appraisers exhibit their professional conclusions in appraisal reports.
What are the reasons a person would need your services?(See list of FAQ's) There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an report include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. An inspection is a third-party evaluation of the accessible structure and appliances of a property, from the roof to the bottom. The stereotypical home inspector's report will contain an evaluation of the condition of the house's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(See list of FAQ's) Simply, they have nothing in common. The CMA depends on indistinct local market trends. Appraisals use comparable sales which are valid resources. The appraisal report will also contain neighborhood and construction prices. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor 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. A certified, state licensed professional who has formed their livelihood on valuing properties in and around Adams County creates the appraisal. 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 fee for work they perform, regardless of their value conclusion.
What's in an appraisal report? (See list of FAQ's)Each report must reflect a believable value opinion and must document the following:
Once the appraisal has been completed, what assurance is there that the value indicated is veritable?(See list of FAQ's) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(See list of FAQ's) Mortgage lenders are an appraiser's typical client, using their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does AFR Appraisals get the data used to estimate values in Adams County or other areas?(See list of FAQ's) Compiling information is one of the main tasks an appraiser engages in. Data can be split into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a numerous places. To research recent sales to be used as "comps", we often go to the local Multiple Listing Service. To double-check actual sales prices, we research tax records and other public documents. Appraisers often need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser assimilates 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?(See list of FAQ's) If you're making some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to determine a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. 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?(See list of FAQ's) PMI is short for for Private Mortgage Insurance. This added policy protects the lender in case a borrower doesn't pay on the loan and the market price of the house 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.
How do I get ready for the appraiser?(See list of FAQ's) 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 condition of its features. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any shrubs and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to 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:
What is "Market Value?"(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(See list of FAQ's) 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 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.
The exception to this rule is when a home owner engages an appraiser directly. In these situations, the appraiser may state the purpose of the appraisal; 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.
Are some home improvements more worthwhile than others?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the most value returned 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, yielding 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.