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FAQ's
What would cause me to need services from Advanced Appraisal Service?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
After completing the report, how can I have a guarantee that the value indicated is trustworthy?
What are the requirements to be a certified appraiser?
Where does Advanced Appraisal obtain information used to estimate the property's value?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What is an appraisal?
The process of performing an appraisal report deals with an estimation which leads to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser arrive at this opinion or estimate.
One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the home, less the depreciation and physical deterioration, plus the land value.
The Sales Comparison Approach involves searching for comparable properties in close proximity and discerning value based on making a comparison of those houses to the house in question. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a home.
The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the income generated by the property.
What does an appraiser do?
An appraiser generates a fair and credible opinion of market value, in the support of real property transactions. Appraisers reveal the details of their professional conclusions in appraisal reports.
What would cause me to need services from Advanced Appraisal Service?
There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal report include:
If you are applying for a loan.
If you would like to reduce your property tax burden.
To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
To contest high property taxes.
If you need to take care of an estate.
To give you a negotiating tool when purchasing real estate.
To determine a likely sales price when listing your home.
To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
Because a government agency such as the IRS requires it.
It's possible you could be involved in a lawsuit - an appraisal will help.
If you need a more detailed explanation of the appraisal process, please click here.
What is the difference between an appraisal and a home inspection?
The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party evaluation of the livable structure and systems of a home, from the roof to the foundation. The archetypal house inspector's report will contain an evaluation of the integrity of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
My agent performed a CMA for me. Is that the same as an appraisal?
To be blunt, it's night and day. The CMA relies on indistinct local market trends. The appraisal is reliant on similar valid comparable sales. In addition, the appraisal verifies other factors like condition, neighborhood and construction costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The person behind the report is frankly the biggest difference between a CMA and an appraisal. A CMA is written 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 has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for assignments, regardless of their value conclusion.
What's in an appraisal report?
The main objective of an appraisal report is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
The client and whose purposes the appraisal is to serve.
The intended use of the report.
The purpose of the assignment.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible factors.
Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
Division of interest, such as fractional interest, physical segment and partial holding.
The scope of work used when completing the assignment.
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report
After completing the report, how can I have a guarantee that the value indicated is trustworthy?
In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
That the information analysis implemented in the appraisal was proper.
Whether individually or collectively, there were no grave errors contained in the report, nor any relevant details left out.
That appraisal services were done in a careful and conscientious fashion.
The final appraisal report was clear, credible and conclusive.
To become a state licensed appraiser, we must meet considerable education and experience requirements that give us the background to formulate an unbiased opinion. Plus, appraisers must obey a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for working up an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification typically translates to many hours of classroom study, tests and practical experience. Once an appraiser is licensed, he or she must then complete continuing education courses so the license stays up to date. To see the specific requirements for any state click here.
Who employs appraisers?
Mortgage lenders are an appraiser's most likely client, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
One of the main tasks an appraiser must accomplish is to collect property data. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a many places. To find out about recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. To double-check actual sales prices, we use items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood product.
And most importantly, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.
What can a full appraisal do for me?
If you're involved in any kind of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to determine the 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, you can avoid overpaying by commissioning an independent appraisal.
For parties settling an estate or divorce, an appraisal from Advanced Appraisal Service is the best documentation to ensure assets are split up evenly. Simply put, a house 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?
PMI is an acronym for Private Mortgage Insurance. PMI takes care of the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on 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.
If PMI is part of your monthly house payment? A new appraisal could save you thousands!
How do I get ready for the appraiser?
We start 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 condition of its amenities. Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help expedite our work plus ensure a more accurate report, try if possible to have the following items:
Any information on the purchase of the property for the last three years.
Information on any written private agreements, such as a shared driveway with a neighbor.
Title policy that lists encroachments or easements.
Brag sheet that lists major home improvements and enhancements, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
What is "Market Value?"
In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."
Who has rights to the appraisal report?
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 certainly entitled to a copy of the report - 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may stipulate the purpose of the appraisal; 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.
Which home renovations add the most to the price?
This really depends on where the home is. For example, while quality appliances are attractive, a $7,000 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 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, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.
Got more questions? Get in touch today.