Colliver Appraisal Service has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) An appraisal report is a thought process that concludes with an opinion of value. The appraiser must use a few "approaches," typically three, to arrive at the estimation of market value. One of the methods in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the home, minus age and physical deterioration, adding the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which deals with concluding a comparison to similar homes close by. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a residence. The third approach is the Income Approach, which is the most important method 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(See list of FAQ's) An appraiser produces an impartial and well substantiated determination of market value, often in the context of a real estate exchange. Appraisers show their expert conclusions in appraisal reports.
What would cause me to need services from Colliver Appraisal Service?(See list of FAQ's) There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
Is an appraisal the same as a home inspection? (See list of FAQ's)Appraisers do not do complete house inspections and are not home inspectors. The purpose of a home inspection is to investigate the structure of the property from foundation to rooftop. The general house inspector's report will include an evaluation of the integrity of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible 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) To be blunt, it's like comparing sugar and saccharin. The CMA utilizes market trends to conduct most of their business. An appraisal utilizes comparable sales that can be validated by records. In addition, the appraisal checks other factors like condition, area and replacement costs. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (See list of FAQ's)The main objective of an appraisal document is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the appraisal has been completed, what guarantee is there that the value conclusion is legitimate?(See list of FAQ's) In communicating an appraisal report, each appraiser must make sure of the following:
Who do appraisers work for?(See list of FAQ's) Commonly, appraisers are called upon by mortgage lenders to estimate the value of a house involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Fayette County or other areas?(See list of FAQ's) Gathering information is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is collected from a number of places. To research recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(See list of FAQ's) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your home, an appraisal helps you set the most appropriate price. 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. Knowing its true value means you can make the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the balance of 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 inspection(See list of FAQ's) The first step in most appraisals is the home inspection. 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser 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"(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(See list of FAQ's) 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 report - 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 situations, 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.
Are some home improvements more worthwhile than others?(See list of FAQ's) A home's location - what city it is in and even what part of that city - is key to this popular question. 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.
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 are right up there with kitchens, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.