Kelly Appraisals has answers to "Frequently Asked Questions"

Kelly Appraisals is always ready to talk to you about any inquiries you might have about appraisals or real estate in Goshen and Elkhart County. Feel free to contact us today.

What is an appraisal?
What does an appraiser do?
Why would someone require a real estate appraisal?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What can I expect to see in my appraisal report?
Once the assignment is done, what guarantee is there that the final number is veritable?
What does it mean for an appraiser to be licensed?
Who engages the services of appraisers?
Where does Kelly Appraisals get the information used to estimate values in Elkhart County or other areas?
How can a licensed appraiser help me?
What exactly is PMI and how can I get rid of it?
Does the appraiser need anything from the homeowner in advance?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?



What is an appraisal?   (Go to list of  questions)

The appraisal process is an evaluation that produces an opinion of value. There are three "common approaches to value" which assists the appraiser conclude this opinion or estimate. One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the processes is the Sales Comparison Approach - which concerns discovering a comparable analysis to other similar properties within a close proximity which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a residential property. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the capital produced by the building.

What does an appraiser do?   (Go to list of  questions)

An appraiser offers an unbiased and well substantiated opinion of market value, in the support of real estate exchanges. Appraisers exhibit their investigation in appraisal reports.


Why would someone require a real estate appraisal?   (Go to list of  questions)

There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for getting an report include:
  • To obtain a loan.
  • To reduce your property taxes.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
  • To contest inflated property taxes.
  • To settle an estate.
  • To give you a leg-up when purchasing real estate.
  • To find the most probable sales price when selling real estate.
  • To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Government agencies such as the IRS need an appraisal on every house.
  • If you ever find yourself in a lawsuit.
Click here for a more extensive explanation of the process involved in getting an appraisal.


How is an appraisal different than a home inspection?   (Go to list of  questions)

The appraiser is not a home inspector and he or she does not do a comprehensive home inspection. A third-party home inspector will judge the structure of the house, from the top to the bottom. Generally, a home inspection report will evaluate the amenities and the necessities of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Go to list of  questions)

To be blunt, it's like comparing Shakespeare to reality TV. What the CMA depends on are superficial trends. Appraisals use comparable sales which are verifiable resources. Also, the appraisal looks at other factors like condition, location and replacement costs. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

Who's behind the report is actually the most significant 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 produce by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the agent, whose income is tied to the value of the home.

What can I expect to see in my appraisal report?   (Go to list of  questions)

The main purpose of an appraisal document 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 appraisal's purpose.
  • The type of value reported and a definition of that value.
  • The effective date of the appraisal.(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 factors, the property rights valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
  • All 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 while working up the assignment.
For a more in depth view of the work that goes into an appraisal report click here: Sample Appraisal Report


Once the assignment is done, what guarantee is there that the final number is veritable?   (Go to list of  questions)

In the documentation of an appraisal, each appraiser must ensure the following:
  • The appraisal contained an appropriate analysis of the data.

  • Whether individually or collectively, there were no significant errors contained in the appraisal, nor any relevant details left out.

  • That appraisal services were not carried out in a careless or negligent fashion.

  • The final appraisal report was transparent, sound and defensible.
To become a state licensed appraiser, we must meet extensive education and experience requirements that prepare us to formulate an unbiased opinion. In addition, appraisers must abide by a stringent industry code of ethics and observe national standards of practice for real estate appraisal. The rules for carrying out an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Go to list of  questions) Licensing and certification takes coursework, tests and experience working under a supervisory appraiser. Once licensed, he/she must then take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Go to list of  questions)

Mortgage lenders are an appraiser's most likely client, needing their services to ensure real estate 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.

Where does Kelly Appraisals get the information used to estimate values in Elkhart County or other areas?   (Go to list of  questions)

One of the main tasks an appraiser performs is to assimilate data. Data can be classified as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.

General data is gathered from a number of places. To research recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.

And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.


How can a licensed appraiser help me?   (Go to list of  questions)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out 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. 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. Without knowing its real value, wise financial decisions are impossible.


What exactly is PMI and how can I get rid of it?   (Go to list of  questions)

PMI is short for for Private Mortgage Insurance. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the loan balance. 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.

Does your monthly loan payment have a lineitem for PMI?Call Kelly Appraisals today at 574-202-4682 or send us an e-mail. Documentation of your home's present value could save you thousands.

Does the appraiser need anything from the homeowner in advance?   (Go to list of  questions)

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 condition of its features. Inside, make sure it is clutter free and that we can get 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 speed things along as well as ensure a more accurate report, try if possible to have the following items:
  • A plot plan or survey of the house and land (if readily available).
  • A list of any personal property that is part of the home and you intend to be sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Find copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A list of "suggested" improvements if the property is to be appraised "as complete".

How does an appraiser define "Market Value"?   (Go to list of  questions)

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."



Does the appraisal belong to the bank or the consumer?   (Go to list of  questions)

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 entitled to a copy of the appraisal - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.

This rule doesn't apply when a home owner engages an appraiser directly. In these scenarios, 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 do whatever they want with the appraisal.


I want to get more for my house. Where should I spend money renovating?   (Go to list of  questions)

This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

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 increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.