Victor G. Simmers, Cert Res RD614 has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The appraisal process is an estimation that generates an opinion of value. This opinion or estimate is discerned through the use of a formal process that commonly utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, less the age and physical deterioration, plus the land value. The Sales Comparison Approach deals with finding comparable houses in close proximity and figuring out the value based on making a comparison of those houses to the property being investigated. Being the most popular approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a residential property. The Income Approach is mainly used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
What does an appraiser do?(Return to top) An appraiser generates a fair and credible assessment of market value, in the support of real property transactions. Appraisers demonstrate their investigation in appraisal reports.
What would cause me to request services from Victor G. Simmers, Cert Res RD614?(Return to top) There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
Is an appraisal the same as a home inspection? (Return to top)Home inspectors do not come to an opinion of value and do not do appraisal reports. The purpose of a home inspection is to investigate the structure of the house from basement to top. The archetypal house inspector's report will contain an evaluation of the condition of the home'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) Frankly, they have nothing in common. What the CMA relies upon are vague trends. The appraisal is reliant on specific definite comparable sales. Area and architectural costs are also a priority in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is the person behind the report. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the value of the home.
What's in an appraisal report? (Return to top)Each appraisal should reflect a credible estimate of value and must identify the following:
Once the assignment has been completed, how can I have certainty that the value conclusion is trustworthy?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(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 Victor G. Simmers, Cert Res RD614 get the information used to estimate values in Polk County or other areas?(Return to top) Collecting information is one of the primary things an appraiser performs. Data can be classified as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is collected from a number of sources. To research recent sales to be used as "comps", we typically use the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers often 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 past experience in creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(Return to 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 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. When buying, you can avoid 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 informed financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental plan covers the lender if a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(Return to top) We begin with an inspection of the home. What this entails is the appraiser, after setting up an appointment, personally going through the home - recording the layout of the rooms, taking photos and documenting the general status of its features. 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 shrubs and relocate any items that would make it difficult to measure the structure. On the inside, make sure we can get to appliances 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?"(Return to top) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(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 entitled 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 situations, the appraiser may state 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.
I want to get more for my house. Where should I spend money renovating?(Return to top) The answer to this is different depending upon the location of the home. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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, an improvement that may not increase your value would be painting just for the sake of redecorating.