Judy Kay Burr has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) An appraisal is a thought process that concludes with an opinion of value. This opinion or estimate is found through the use of a formal process that typically uses three "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the home, less the depreciation and physical dilapidation, adding the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which involves figuring a comparison to comparable houses nearby. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. 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 income produced by the property.
Describe what an appraiser does(Top) An appraiser forumlates a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers show their professional conclusions in appraisal reports.
What would cause me to need your services?(Top) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) To be blunt, it's like comparing broadband and dial-up. The CMA utilizes market trends to generate most of their business. An appraisal relies on comparable sales that can be validated by public record. In addition, the appraisal looks at other factors like condition, area and replacement prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person behind the report is frankly the biggest 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 has made a career out of valuing properties. Further, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the price of the home.
Once the report has been completed, what guarantee is there that the value indicated is veritable?(Top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(Top) Mortgage lenders are an appraiser's most likely client, requiring their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Bremer County or other areas?(Top) Compiling information is one of the main things an appraiser does. Data can be split into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is received from a numerous places. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have 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 last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(Top) An appraisal is a worthwhile whenever your home's value is relevant to some financial decision. When selling your house, an appraisal helps you set a price that maximizes profit and reduces time on the market. When buying, you can avoid 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. Knowing its true value is essential to making informed financial decisions.
What exactly is PMI and how can I get rid of it?(Top) PMI is an acronym for Private Mortgage Insurance. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Should I do anything in advance of the appraisal inspection(Top) 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. Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
How does an appraiser define "Market Value"?(Top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Top) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the appraisal - 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.
This rule doesn't apply when a home owner hires an appraiser directly. 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 stated 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?(Top) The added value of a particular amenity truly depends on the local market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 weren't far behind, returning 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 atypical for your neighborhood in terms of size.