DB Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(List of questions) The appraisal process is an estimation that produces an opinion of value. This opinion or estimate is concluded through the use of a formal process that generally uses the three main "common approaches to value". The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves discerning what the improvements would cost minus physical depreciation, plus the land value. The Sales Comparison Approach deals with finding comparable homes in close proximity and finding value based on making a comparison of those homes to the home being appraised. Being the most commonly used approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residence. 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 capital generated by the property.
Describe what an appraiser does(List of questions) An appraiser generates an unbiased and well justified determination of market value, to be used in making real estate transactions. Appraisers summarize their professional investigation in appraisal reports.
What would cause me to need your services?(List of questions) There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
What is the difference between an appraisal and a home inspection? (List of questions)The appraiser is not a home inspector and does not do a comprehensive home inspection. An inspection is a third-party investigation of the accessible structure and appliances of a home, from the roof to the foundation. For the most part, a home inspection report will discuss the amenities and the requirements of the home: air conditioning (weather permitting), electrical systems, 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?(List of questions) Frankly, they have nothing in common. The CMA depends on indefinite market trends. The appraisal is reliant on specific proven comparable sales. The appraisal report will also contain area and construction 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.
The credentials of the person behind the report is frankly the biggest difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who has made a career 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 flat fee for work they perform, regardless of their outcome.
What's in an appraisal report? (List of questions)Every report should indicate a credible value opinion and should document the following:
Once the assignment is done, how can I have a guarantee that the value indicated is trustworthy?(List of questions) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(List of questions) Mortgage lenders are an appraiser's typical client, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does DB Appraisal Services get the information used to estimate values in Shelby County or other areas?(List of questions) Compiling information is one of the primary occupations of an appraiser. Data can be divided into Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is collected from a many sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To verify actual sales prices, we look at tax records and other public documents. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(List of questions) If you're involved in any kind of financial decision and the value of your home matters, you'll want a full appraisal. When selling your house, an appraisal helps you set a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(List of questions) PMI is short for for Private Mortgage Insurance. PMI guards the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the balance of 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.
Does the appraiser need anything from me in advance?(List of questions) We start with an inspection of the home. 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 find our way to things like furnaces and water heaters. On the outside, trim any bushes 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"?(List of questions) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(List of questions) 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 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 stipulate 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 use the appraisal for any purpose.
How can I get the most ROI out of home improvements?(List of questions) 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
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 were second, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.