AA Advanced Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The appraisal process is an evaluation that leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or valuation. One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the home, less the depreciation and physical deterioration, adding the land value. Easily the most common approach in finding the value of a house is the Sales Comparison Approach which deals with making a comparison to comparable houses nearby. The Sales Comparison Approach is normally the most accurate and best 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 commonly used to find the market value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(Return to top) An appraiser provides an impartial and well supported determination of market value, in the support of real estate transactions. Appraisers summarize their expert investigation in appraisal reports.
Why would a person need a real estate appraisal?(Return to top) There are many reasons to obtain an appraisal from AA Advanced Appraisals with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
Is an appraisal the same as a home inspection? (Return to top)Home inspectors do not figure out an opinion of value and do not do appraisal reports. A third-party home inspector will investigate the structure of the property, from the roof to the foundation. The usual home inspector's report will contain an evaluation of the condition of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) To be blunt, it's like comparing broadband and dial-up. What the CMA relies upon are vague trends. An appraisal relies on comparable sales that can be verified by records. Area and architectural prices are also important in an appraisal. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the most significant factor is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, Michigan licensed professional who has formed their livelihood on valuing homes in and around Livingston 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 flat fee for work they perform, regardless of their outcome.
What are the contents of an appraisal report? (Return to top)The main objective 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, you'll usually see the following:
After completing the report, what assurance is there that the final number is veritable?(Return to top) In communicating an appraisal report, each appraiser must ensure the following:
Who engages the services of appraisers?(Return to top) Mortgage lenders are an appraiser's typical client, needing 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 divorce and estate settlements.
Where does an appraiser get the information used to estimate values in Livingston County or other areas?(Return to top) Compiling information is one of the main things an appraiser performs. Data can be split into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is received from a variety of places. To look up recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To double-check actual sales prices, we research tax records 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 past experience in doing assignments for other properties 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 relevant to some financial decision. 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. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
What exactly is PMI and how can I get rid of it?(Return to top) PMI is short for for Private Mortgage Insurance. This supplemental policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than what the borrower still owes on 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.
Should I do anything in advance of the appraisal appointment(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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and relocate any items that would get in our way while we measure the structure. Indoors, make sure the appraiser 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 is commonly defined as:
Who actually owns the appraisal report?(Return to top) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Return to top) The added value of a particular amenity truly depends on the local market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, returning 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.