Robert W. Bennett Real Estate Appraiser has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) An appraiser provides an evaluation that generates an opinion of value. The appraiser must use a several "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the approaches that appraisers use to find the value of a home; it involves finding what the improvements would cost minus physical depreciation, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparable analysis to other similar nearby properties which have recently sold. The Sales Comparison Approach is normally the most definitive and best indicator of value for a house. 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 income produced by the building.
What does an appraiser do?(See list of FAQ's) An appraiser generates an impartial and well supported opinion of market value, to be used in making real estate transactions. Appraisers present their investigation in appraisal reports.
What would cause me to need a real estate appraisal?(See list of FAQ's) There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an report include:
Is an appraisal the same as a home inspection? (See list of FAQ's)Appraisers do not do perform residential property inspections and are not home inspectors. A third-party home inspector will inspect the structure of the home, from the roof to the foundation. The usual property inspector's report will include an evaluation of the condition of the property's heating systems, 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.
My agent performed a CMA for me. Is that the same as an appraisal?(See list of FAQ's) To be honest, they have nothing in common. The CMA relies on indefinite market trends. An appraisal relies on comparable sales that can be proven by records. In addition, the appraisal looks at other factors like condition, neighborhood and replacement costs. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the largest differentiator is the person creating 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 produce by a licensed, certified professional who makes a living 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 previously agreed upon fee for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (See list of FAQ's)The main objective of an appraisal document is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the assignment has been completed, how can I have assurance that the value indicated is trustworthy?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(See list of FAQ's) Mortgage lenders are an appraiser's typical customer, requiring their services to ensure property 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 Robert W. Bennett Real Estate Appraiser get the data used to estimate values in Pulaski County or other areas?(See list of FAQ's) Collecting data is one of the primary functions of an appraiser. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a many sources. To find out about recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To verify actual sales prices, we look at tax records and other public documents. Appraisers often have to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(See list of FAQ's) If you're making some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. For those selling a home, you'll want to figure out a 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. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Robert W. Bennett Real Estate Appraiser is the best documentation to ensure assets are split up evenly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI stands for Private Mortgage Insurance. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes 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.
How do I get ready for the appraiser?(See list of FAQ's) The first step in most appraisals is the property inspection. 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, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
What does "Market Value" mean?(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) 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 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 cases, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the most value returned from renovating a home comes in the kitchen. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms weren't far behind, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.