Dearing & Associates Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The appraisal process is an estimation that leads to an opinion of value. There are three "common approaches to value" which helps the appraiser conclude this opinion or valuation. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the methods is the Sales Comparison Approach - which concerns finding a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is commonly the most definitive and clearest indicator of value for a residential property. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to figure the market value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Top) An appraiser generates an unprejudiced and well substantiated assessment of market value, in the support of real estate transactions. Appraisers demonstrate their analysis in appraisal reports.
Why would someone request a real estate appraisal?(Top) There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
My agent performed a CMA for me. Is that the same as an appraisal?(Top) To be honest, they share nothing in common. The CMA uses market trends to conduct most of their business. Appraisals use comparable sales which are valid resources. The appraisal report will also contain area and building prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is the person doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. The appraisal is produce 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 accept a flat sum for assignments, regardless of their outcome.
After completing the report, how can I have assurance that the value indicated is legitimate?(Top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Top) Most of the time, appraisers are hired by lenders to estimate the value of property involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Fayette County or other areas?(Top) Gathering information is one of the primary activities of an appraiser. Data can be described as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a number of places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Top) An appraisal is a worthwhile anytime your home's value is pertinent to some financial decision. If you're selling your house, an appraisal helps you set the most appropriate price. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Dearing & Associates Appraisal Services is the best way to ensure assets are divided fairly. 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?(Top) PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary policy covers the lender in case a borrower defaults on the loan and the value of the home is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal inspection(Top) We begin with an inspection of the home. 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. On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
To help speed things along plus ensure a more accurate report, try if possible to have the following items:
Define "Market Value"(Top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Top) In most real estate transactions, the appraisal is ordered by the lender. 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 bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may state the purpose of the appraisal; 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.
How can I get the most ROI out of home improvements?(Top) The added value of a particular amenity truly depends on the local market. 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
As a rule, the most value returned from renovating a home comes in the kitchen. 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, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.