Keim Residential Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The process of producing an appraisal consists of an evaluation which leads to an opinion of value. This opinion or estimate is discerned through the use of a formal process that typically uses the three main "common approaches to value". The Cost Approach is one of the methods that real estate appraisers use to find value; it involves discerning what the improvements would cost minus physical deterioration, plus the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which deals with making a comparison to similar properties nearby. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a residence. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to find the market value of a property based on what an investor would pay based on the income produced by the property.
Describe what an appraiser does(Back to top) An appraiser forumlates a fair and credible assessment of market value, often in the context of a real estate exchange. Appraisers present their conclusions in appraisal reports.
Why would a person request your services?(Back to top) There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
How is an appraiser different than a home inspector? (Back to top)Appraisers do not do complete house inspections and are not home inspectors. The point of a home inspection is to investigate the structure of the property from foundation to rooftop. Usually, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) To be honest, they have nothing in common. What the CMA relies upon are vague trends. An appraisal is based on comparable sales that can be proven by public record. In addition, the appraisal looks at other factors like condition, location and construction costs. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the largest differentiator is the person behind the report. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, state licensed professional who has formed their livelihood on valuing real estate in and around Northampton County creates the appraisal. Further, the appraiser is an independent voice, with no conditional interest in the value conclusion, unlike the agent, whose income is tied to the price of the home.
What are the contents of an appraisal report? (Back to top)The main objective of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
Upon completion of the appraisal, what assurance is there that the value indicated is veritable?(Back to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers?(Back to top) Most of the time, appraisers are hired by mortgage lenders to estimate the value of a home involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Northampton County or other areas?(Back to top) Collecting data is one of the primary things an appraiser performs. Data can be split into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a many places. To research recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other courthouse documents verify 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 product.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(Back to top) An appraisal is a valuable tool anytime your home's value is pertinent to some financial decision. For those selling a home, you'll want to determine a 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. Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is short for for Private Mortgage Insurance. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(Back to top) 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 amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and relocate 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 speed things along plus ensure a more accurate report, attempt if possible to have the following items:
Define "Market Value"(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Back to top) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 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 engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Back to top) It really depends on the market. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, yielding 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.