Bob Hayes Real Estate Appraiser has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The process of writing an appraisal deals with an inspection which leads to an opinion of value. The appraiser will use a few "approaches," typically three, to draw up the estimation of market value. One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves searching for comparable houses in the vicinity and finding value based on making a comparison of those prior sales to the house being investigated. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.
Describe what an appraiser does(Back to top) An appraiser forumlates a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers document their expert analysis in appraisal reports.
Why would a person need a real estate appraisal?(Back to top) There are a lot of reasons to obtain an appraisal from Bob Hayes Real Estate Appraiser with the usual reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) To be blunt, it's apples and oranges. What the CMA relies upon are superficial trends. An appraisal utilizes comparable sales that can be proven by public record. Area and architectural prices are also precedent in an appraisal. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is the person behind the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. A certified, state licensed professional who has formed their livelihood on valuing real estate in and around Anchorage County creates 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 accept a flat fee for assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (Back to top)Each report should indicate a supported value opinion and will clearly state the following:
After completing the appraisal, what guarantee is there that the final number is legitimate?(Back to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who are an appraiser's customers?(Back to top) Mortgage lenders are an appraiser's most likely customer, requiring their services to ensure real estate 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 an appraiser get the information used to estimate values in Anchorage County or other areas?(Back to top) One of the main tasks an appraiser performs is to collect property data. Data can be split into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
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 public documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
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?(Back to top) If you're involved in any kind of financial decision and the value of your home matters, you'll want a full appraisal. 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. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Back to top) PMI is short for for Private Mortgage Insurance. This added policy takes care of the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan. 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.
Do you need anything from the homeowner in advance?(Back to top) We start 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 status of its amenities. On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(Back to top) 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?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. 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 report - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
The exception to this rule is 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 stated otherwise, the home owner can do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(Back to top) Like all things real estate, this is dependent on a home's location. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the best ROI from renovating a home comes in the kitchen. 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, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.