Home Analytics has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) The method of producing an appraisal consists of an evaluation which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or valuation. One of them is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most commonly used approach, the Sales Comparison Approach tends to be the most accurate 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 deals with estimating what an investor would pay based on the income produced by the property.
What does an appraiser do?(Return to top) An appraiser provides an unprejudiced and well supported assessment of market value, in the support of real estate transactions. Appraisers present their expert findings in appraisal reports.
What would cause me to request your services?(Return to 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 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 utilizes market trends to conduct most of their business. Appraisals use similar sales which are valid resources. Area and building costs are also precedent in an appraisal. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person creating the report is actually the most significant 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 has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for work they perform, regardless of their value conclusion.
What are the contents of an appraisal report? (Return to top)Each appraisal should demonstrate a believable value opinion and will document the following:
Once the report has been completed, what assurance is there that the value conclusion is valid?(Return to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who do appraisers work for?(Return to top) Mortgage lenders are an appraiser's most likely customer, needing their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does Home Analytics get the information used to estimate values in Mecklenburg County or other areas?(Return to top) One of the main tasks an appraiser must accomplish is to compile data. Data can be described as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a many places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To double-check actual sales prices, we research items in the assessor's office and other public documents that are usually online nowadays. 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 assembles general data from his or her past experience in doing assignments for other houses in the same market.
What can a full appraisal do for me?(Return to top) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your house, an appraisal assists you in setting 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.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes 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(Return to top) We start with an inspection of the property. 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 amenities. Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help speed things along plus ensure a more accurate report, try if possible to have the following items:
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) 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 certainly entitled to a copy of the appraisal - it's usually bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price?(Return to top) This really depends on where the home is. 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 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, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.