Kelly Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
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:
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:
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:
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 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:
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:
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.