AppraiserTechnology.Com - James Atwood, SRA has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) The appraisal process is an evaluation that produces an opinion of value. This opinion or estimate is arrived at through the use of a formal method that commonly uses three "common approaches to value". One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which deals with making a comparison to comparable houses nearby. The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a residential property. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to find 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(Return to top) An appraiser forumlates a fair and credible determination of market value, to be used in making real estate transactions. Appraisers exhibit their analysis in appraisal reports.
Why would a person require your services?(Return to top) There are many reasons to obtain an appraisal from AppraiserTechnology.Com - James Atwood, SRA with the usual reason being real estate and mortgage transactions. Some 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 share nothing in common. The CMA relies on indefinite local market trends. The appraisal is based on specific proven comparable sales. Also, the appraisal verifies other factors like condition, location and replacement costs. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is who's doing 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, Tennessee licensed professional who bases their livelihood on valuing properties in and around Davidson County is behind the appraisal. 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 value conclusion.
What are the contents of an appraisal report? (Return to top)The main point of an appraisal document is to let the reader know the value of the real estate in question, 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 indicated is veritable?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Return to top) Mortgage lenders are an appraiser's typical customer, needing 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 information used to estimate values in Davidson County or other areas?(Return to top) One of the most important tasks an appraiser performs is to collect property data. Data can be split into 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 received from a number of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.
And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other houses in the same market.
What can a full appraisal do for me?(Return to top) An appraisal is a worthwhile anytime your home's value is pertinent to a financial decision. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from AppraiserTechnology.Com - James Atwood, SRA is the best way to ensure assets are divided properly. Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is an acronym for Private Mortgage Insurance. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the house is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(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 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 . Trim any bushes and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can easily access appliances like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return to top) For mortgage transactions, the lender orders 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 bundled 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 scenarios, the appraiser may define the purpose of the appraisal; 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?(Return to top) This really depends on where the home is. 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 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 were second, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.