First Appraisal Network Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The method of producing an appraisal report deals with an inspection which forms an opinion of value. There are three "common approaches to value" which helps the appraiser come to this opinion or estimate. One of the methods in use is the Cost Approach, which is what it would cost to replace the improvements to the house, minus age and physical deterioration, adding the land value. The most common approach in finding the likely sales price of a home is the Sales Comparison Approach which concerns concluding a comparison to comparable houses close by. The Sales Comparison Approach is normally the most accurate and best indicator of value for a house. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to figure the value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do?(Return to top) An appraiser forumlates an impartial and well substantiated opinion of market value, often in the context of a real estate purchase. Appraisers illustate their findings in appraisal reports.
Why would I request a real estate appraisal?(Return to top) There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
How is an appraiser different than a home inspector? (Return to top)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. The point of a home inspection is to evaluate the structure of the home from bottom to top. Usually, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) To be honest, they share nothing in common. What the CMA relies upon are ill-defined trends. An appraisal relies on comparable sales that can be proven by records. The appraisal report will also contain area and building values. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person behind the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. A certified, state licensed professional who bases their livelihood on valuing real estate in and around Saint Tammany County creates the appraisal. Further, the appraiser is an unbiased voice, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.
What's in an appraisal report? (Return to top)The main purpose of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
After completing the appraisal, how can I have confidence that the value conclusion is valid?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Return to top) Mortgage lenders are an appraiser's most likely client, using their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Saint Tammany County or other areas?(Return to top) One of the primary tasks an appraiser performs is to compile data. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is gathered from a variety of places. To research recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. To double-check actual sales prices, we research items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
Why do I need a professional appraisal?(Return to top) An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from First Appraisal Network Services is the best documentation to ensure assets are divided properly. A home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Return to top) PMI stands for Private Mortgage Insurance. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
How do I get ready for the appraiser?(Return to top) We start with an inspection of the property. During this process, the appraiser 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. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. On the outside, 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:
What is "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) For mortgage transactions, the lender requests 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 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 engages an appraiser directly. In these scenarios, the appraiser may define 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) Like all things real estate, this is dependent on a home's location. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.