What is a Real Estate Appraisal
The appraisal process is an estimation which leads to an opinion of market value. The opinion is formed by process that may utilize the three main common approaches to value.. The Cost Approach is how much it would costs would be required to replace or reproduce the improvements, minus physical deterioration if the home is not new and other factors improved on the site, then adding the land value.. The most common approach of the methods is Sales Comparison Approach which concerns finding a comparable sale analysis to other similar properties in the area which have recently sold for a fair market value price. The Sales Comparison Approach is the most definitive and most used indicator of property value for a residential home. The Income Approach is mainly used for determining the market value of income producing properties based on what an investor by determining GRM factors and would pay based on the amount of net operating income a property can produce.
What an Appraiser Does
An appraiser produces an unbiased and well supported determination of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert investigation in appraisal reports.
Real Estate Appraisals are Needed for
If you are applying for a loan.
If you would like to lower your property tax obligations.
To build a case for a homeowner's equity and remove PMI.
To contest inflated property taxes.
To handle an estate.
To provide you an edge when purchasing a home.
To determine an honest property value when putting your home on the market.
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 require an appraisal on every home.
It's possible you could be involved in a lawsuit - an appraisal will definitely help.
If you would like to lower your property tax obligations.
To build a case for a homeowner's equity and remove PMI.
To contest inflated property taxes.
To handle an estate.
To provide you an edge when purchasing a home.
To determine an honest property value when putting your home on the market.
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 require an appraisal on every home.
It's possible you could be involved in a lawsuit - an appraisal will definitely help.
Home Appraisal or Inspection
Real Estate Appraisers do not do complete house inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the house, from the roof to the foundation. For the most part, a home inspection report will explain the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
CMA or Appraisal
It's like comparing apples to oranges. What the CMA depends on are ill-defined trends. Appraisals use comparable sales which are valid resources. In addition, the appraisal verifies other factors like condition, location 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. The credentials of the person creating 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 be trained in technical valuation concepts or even have a handle on market trends. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat fee for work they perform, regardless of their value conclusion.
Appraisal Report Information
Each appraisal must reflect a credible value opinion and will identify the following:
- The client and whose purposes the appraisal is to serve.
- The intended use of the report.
- The purpose of the appraisal.
- The type of value reported and a definition of that value.
- The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
- Relevant property attributes, including: location, physical characteristics, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible items.
- All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
- Division of interest, such as fractional interest, physical segment and partial holding.
- The scope of work used when completing the job.
Appraiser get their information from
Gathering data is one of the main things an appraiser performs. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To double-check actual sales prices, we use items in the assessor's office and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood product.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To double-check actual sales prices, we use items in the assessor's office and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood product.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
Appraisers work for
Most of the time, appraisers are called upon by lenders to render a value opinion on a house involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Licensed Appraiser
An appraisal is a worthwhile whenever your home's value is pertinent to some financial decision. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Johnston Appraisal Services is the best way to ensure assets are split up evenly. A home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
Prepare for the Appraiser
The first step in most appraisals is the home inspection. During this process, we 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. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would get in our way while we measure the structure. On the inside, make sure we can easily access appliances like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
A survey or plot map of the property and building (if readily available).
Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
A list of "suggested" improvements when the property is being appraised "as complete".
To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
A survey or plot map of the property and building (if readily available).
Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
A list of "suggested" improvements when the property is being appraised "as complete".
Who owns the Appraisal Report
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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may define 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may define 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.
Appraise 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."
Home Improvements
It really depends on the market. For example, if you're in a neighborhood 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. According to one national survey, kitchen remodels returned an average of 85% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,500 to the value of the home. Bathrooms were second, returning 80%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.
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 85% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,500 to the value of the home. Bathrooms were second, returning 80%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.
