Ann Baum Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraisal is a thought process leading to an opinion of value. There are three "common approaches to value" which assists the appraiser arrive at this opinion or estimate. The Cost Approach is one of the methods that appraisers use to find the value of a property; it involves figuring what the improvements would cost without physical degradation, adding the land value. The Sales Comparison Approach involves finding similar homes nearby and discovering the value based on making a comparison of those prior sales to the home being appraised. The Sales Comparison Approach is normally the most accurate and best indicator of value for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the income produced by the building.
Describe what an appraiser does(Return to top) An appraiser generates a fair and credible opinion of market value, in the support of real estate exchanges. Appraisers document their analysis in appraisal reports.
Why would someone request services from Ann Baum Appraisal Service?(Return to top) There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal include:
How is an appraisal different than a home inspection? (Return to top)The appraiser is not a home inspector nor does he/she do a full home inspection. An inspection is a third-party evaluation of the livable structure and systems of a property, from the roof to the bottom. Commonly, a home inspection report will explain the amenities and the necessities 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, visible 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?(Return to top) Simply put, it's like comparing sugar and saccharin. The CMA relies on vague market trends. An appraisal is based on comparable sales that can be verified by records. Area and construction costs 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.
The credentials of the person creating the report is actually the biggest difference between a CMA and an appraisal. 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. The appraisal is produce by a licensed, certified professional who makes a living 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 accept a previously agreed upon sum for work they perform, regardless of their value conclusion.
What's in an appraisal report? (Return 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, you'll usually see the following:
Upon completion of the report, how can I have a guarantee that the value conclusion is legitimate?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Return to top) Mortgage lenders are an appraiser's typical client, requesting their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Ann Baum Appraisal Service get the information used to estimate values in Dare County or other areas?(Return to top) One of the most important activities of an appraiser is to compile data. Data can be described as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is gathered from a variety of places. To look up recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why do I need a professional appraisal?(Return to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out a 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. 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 home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. This additional 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 less 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?(Return to top) We start with an inspection of the property. 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 features. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house . Trim any bushes and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access appliances like furnaces and water heaters.
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"?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Return 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 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.
This rule doesn't apply when a home owner engages an appraiser directly. In these scenarios, the appraiser may state the purpose of the appraisal; 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?(Return to top) The added value of a particular amenity truly depends on the local market. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.