Appraisal Associates, Inc. has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Top) The process of performing an appraisal report deals with an investigation which leads to an opinion of value. The real estate appraiser will typically use a several "approaches," typically three, to draw up the estimation of market value. One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which deals with making a comparison to comparable properties nearby. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. 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.
What does an appraiser do?(Top) An appraiser generates an unprejudiced and well justified opinion of market value, to be used in making real estate transactions. Appraisers present their professional investigation in appraisal reports.
What would cause me to require services from Appraisal Associates, Inc.?(Top) There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
My agent performed a CMA for me. Is that the same as an appraisal?(Top) Simply put, it's like comparing broadband and dial-up. The CMA uses market trends to create most of their business. The appraisal relies on specific verifiable comparable sales. Also, the appraisal looks at other factors like condition, area and building prices. 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.
But the biggest difference 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. The appraisal is created by a licensed, certified professional who makes a living 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 flat fee for work they perform, regardless of their outcome.
Once the assignment has been delivered, what assurance is there that the value indicated is legitimate?(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?(Top) Mortgage lenders are an appraiser's most likely customer, requiring their services to ensure real estate 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 Kalamazoo County or other areas?(Top) One of the main things an appraiser does is to gather property data. Data can be split into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is received from a variety of places. To look up recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office and other public documents. Appraisers routinely need to report when a property is 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 assimilates 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?(Top) If you're making any kind of financial decision and the value of your home is relevant, you'll want an appraisal. 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. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Top) PMI is short for for Private Mortgage Insurance. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan. 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.
Do you need anything from me in advance?(Top) We begin 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. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure we can get to items like furnaces and water heaters.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
How does an appraiser define "Market Value"?(Top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(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 allowed to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Top) 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!
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 weren't far behind, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.