Whitworth Appraisals has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal (List of questions)The procedure of writing an appraisal consists of an evaluation which leads to an opinion of value. This opinion or estimate is concluded by using a formal process that usually uses the three main "common approaches to value". One of the methods is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, then adding the land value. Another of the methods is the Sales Comparison Approach - which deals with making a comparison to other similar properties within a close proximity which have recently sold. The Sales Comparison Approach is normally the most accurate and clearest indicator of 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? (List of questions)An appraiser forumlates an impartial and well justified determination of market value, to be used in making real estate transactions, estate or legal property settlements, tax appeals, etc. Appraisers document their investigation in appraisal reports.
What are the reasons someone would need a real estate appraisal? (List of questions)There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal include:
What is the difference between an appraisal and a home inspection? (List of questions)Appraisers do not do provide house inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the property, from the roof to the foundation. Commonly, a home inspection report will evaluate the amenities and the requirements of the home: 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative (or competitive) market analysis(CMA)? (List of questions)Frankly, it's night and day. What the CMA relies upon are superficial trends. Appraisals use similar sales which are selected from verifiable sources. Also, the appraisal looks at other factors like condition, location and replacement prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
However, the most significant factor is who's creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, state licensed professional who bases their livelihood on valuing homes in and around your property is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat sum for work they perform, regardless of their value conclusion with no influence from a potential sale.
What are the contents of an appraisal report? (List of questions)Each appraisal must demonstrate a believable estimate of value and will document the following:
Upon completion of the report, how can I have confidence that the value conclusion is accurate? (List of questions)In communicating an appraisal report, each appraiser must make sure of the following:
Who employs appraisers? (List of questions)Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements. Individuals obtain appraisals to plan or settle their estates, for divorces, PMI removal and other reasons.
Where does an appraiser get the information used to estimate values in Clayton County or other areas? (List of questions)Collecting data is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is obrained from numerous places and is based on intensive research. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparable sales and/or listings. Tax records and other public documents verify physical data and actual sales prices in a market. Appraisers often need to report when a property lies 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 assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
What can a full appraisal do for me? (List of questions)Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine a price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. 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. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark without a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that? (List of questions)PMI is the common abbreviation for for Private Mortgage Insurance. PMI guards the lender if a borrower doesn't pay on the loan and the value of the house is lower 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 appointment (List of questions)We start with an inspection of the property. 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 both inside and out for inclusion in the report. Is there anything you can do to help? Yes there is! First, be sure we have easy access to both the exterior and interior of the house. Trim any shrubs and move any items that would get in our way while we measure the structure. Indoors, make sure we can easily access items 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:
What is "Market Value?" (List of questions)In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report? (List of questions)In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer who eventually pays for the report, the lender is the intended user. The buyer is certainly 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 entity ordering the appraisal is considered the client. By law, the client is the only one the appraiser can provide with a copy of the report without written permission from the client.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, 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.
I want to get more for my house. Where should I spend money renovating? (List of questions)This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 might add approximately $8,800 to the value of the home. 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 or features.