King Appraisal Group has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The process of performing an appraisal report deals with an estimation which leads to an opinion of value. There are three "common approaches to value" which helps the appraiser arrive at this opinion or estimate. The Cost Approach is one of the processes that appraisers use to find value; it involves finding what the improvements would cost less physical depreciation, plus the land value. The Sales Comparison Approach deals with searching for similar homes in the vicinity and discerning value based on comparing those houses to the property being investigated. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. The Income Approach is mainly used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
Describe what an appraiser does(Back to top) An appraiser generates an unprejudiced and well supported opinion of market value, to be used in making real estate transactions. Appraisers summarize their investigation in appraisal reports.
What are the reasons I would require your services?(Back to top) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
How is an appraiser different than a home inspector? (Back to top)The appraiser is not a home inspector nor does he/she do a full home inspection. An inspection is a third-party investigation of the accessible structure and appliances of a house, from the roof to the bottom. Commonly, a home inspection report will explain 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 capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Frankly, they have nothing in common. The CMA relies on indefinite local market trends. The appraisal is based on similar valid comparable sales. Also, the appraisal looks at other factors like condition, area and construction prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The person behind the report is actually the biggest 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. A certified, state licensed professional who has formed a career on valuing properties in and around Buchanan County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their outcome.
What are the contents of an appraisal report? (Back to top)The main point 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:
Once the assignment is done, how can I have assurance that the value indicated is veritable?(Back to top) In communicating an appraisal report, each appraiser must ensure the following:
Who hires an appraiser?(Back to top) Mortgage lenders are an appraiser's typical client, needing their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does King Appraisal Group get the data used to estimate values in Buchanan County or other areas?(Back to top) Compiling information is one of the primary occupations of an appraiser. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is collected from a number of sources. To find out about recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.
Why do I need a professional appraisal?(Back to top) An appraisal is a valuable tool whenever your home's value is pertinent to some financial decision. For those selling a home, you'll want to determine the 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. 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?(Back to top) PMI is the common abbreviation for for Private Mortgage Insurance. This added policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
How do I get ready for the appraiser?(Back to top) 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. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back to top) For mortgage transactions, the lender requests 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 entitled 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 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 use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Back to top) The added value of a particular amenity truly depends on the local market. 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, yielding 85%. Adding bedrooms and baths can also increase 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.