Appraisal Dynamic has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The appraisal process is an evaluation that generates an opinion of value. The real estate appraiser will use a few "approaches," typically three, to conclude the estimation of market value. The Cost Approach is one of the processes that real estate appraisers use to find the value of a home; it involves discerning what the improvements would cost without physical deterioration, adding the land value. Another of the processes is the Sales Comparison Approach - which deals with finding a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is commonly the most definitive and best indicator of a liklely sales price for a residence. The Income Approach is mainly used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does(Return to top) An appraiser forumlates a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers illustate their conclusions in appraisal reports.
What would cause me to need your services?(Return to top) There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
How is an appraiser different than a home inspector? (Return to top)The appraiser is not a home inspector and does not do a comprehensive home inspection. A third-party home inspector will evaluate the structure of the property, from the top to the bottom. Usually, a home inspection report will explain the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Simply, they have nothing in common. The CMA utilizes market trends to create most of their business. An appraisal is based on comparable sales that can be verified by records. Location and construction values are also important in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person behind the report is frankly 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 bear specific competence when it comes to home valuation. A certified, Michigan licensed professional who has formed a career on valuing homes in and around Saint Clair County creates the appraisal. 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 sum for assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (Return to top)Each report should indicate a believable estimate of value and should document the following:
Once the report has been completed, how can I have confidence that the value conclusion is veritable?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who employs appraisers?(Return to top) Typically, appraisers are called upon by mortgage lenders to render a value opinion on a house involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does Appraisal Dynamic get the data used to estimate values in Saint Clair County or other areas?(Return to top) Compiling information is one of the primary roles of an appraiser. Data can be classified 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 during an inspection.
General data is received from a many sources. To research recent sales to be used as "comps", we typically use the local Multiple Listing Service. To double-check actual sales prices, we look at tax records and other public documents that are usually online nowadays. 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 last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
How can a licensed appraiser help me?(Return to top) An appraisal is a worthwhile whenever the value of your home is relevant to some financial decision. 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home 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. This additional plan takes care of the lender in case a borrower defaults on the loan and the value of the property is less than the balance of 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 home. 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 access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, 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 allowed 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 stipulate 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.
Which home renovations add the most to the price?(Return to top) A home's location - what city it is in and even what part of that city - is key to this popular question. 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost 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.