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Bates Real Estate & Appraisals, Inc. has answers to "Frequently Asked Questions"

Bates Real Estate & Appraisals, Inc. is ready to answer any inquiries you might have about appraisals or real estate in Lake Wales and Polk County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
What would cause me to need your services?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Once the report is done, how can I have assurance that the value conclusion is veritable?
What does it mean for an appraiser to be licensed?
Who do appraisers work for?
Where does an appraiser get the data used to estimate values in Polk County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal appointment
What does "Market Value" mean?
Who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



Describe an appraisal   (Back to top)

The method of creating an appraisal report consists of an inspection which forms an opinion of value. There are three "common approaches to value" which helps the appraiser conclude this opinion or valuation. The Cost Approach is one of the processes that real estate appraisers use to find value; it involves concluding what the improvements would cost less physical degradation, plus the land value. Another of the processes is the Sales Comparison Approach - which involves making a comparison to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?   (Back to top)

An appraiser produces an objective and well substantiated assessment of market value, to be used in making real estate transactions. Appraisers exhibit their findings in appraisal reports.


What would cause me to need your services?   (Back to top)

There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal report include:
  • To receive a loan.
  • To reduce your tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To challenge improperly assessed property taxes.
  • If you need to settle an estate.
  • To offer you a leg-up when purchasing real estate.
  • To determine an honest sales price when listing your home.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
For a more extensive description of the appraisal process click here.


What is the difference between an appraisal and a home inspection?   (Back to top)

Home inspectors do not figure out an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the accessible structure and systems of a property, from the top to the foundation. Usually, a home inspection report will discuss the amenities and the requirements of the home: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed 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)

Frankly, they have nothing in common. The CMA utilizes market trends to create most of their business. The appraisal is based on similar definite comparable sales. Area and building values are also precedent in an appraisal. 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.

But the biggest difference is the person doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. A certified, state licensed professional who has formed their livelihood on valuing homes in and around Polk 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 collect only a flat fee for assignments, regardless of their value conclusion.

What does the appraisal report contain?   (Back to top)

The main purpose 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:
  • The client and other intended users.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • The type of value reported and a definition of the value reported.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible factors.
  • All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work considered when completing the appraisal.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report


Once the report is done, how can I have assurance that the value conclusion is veritable?   (Back to top)

In the documentation of an appraisal, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was proper.

  • Whether individually or collectively, there were no major errors contained in the report, nor any relevant details left out.

  • That appraisal services were delivered in a careful and cognizant fashion.

  • The final appraisal report was understandable, legitimate and conclusive.
To become a state licensed appraiser, we must satisfy considerable education and experience requirements that give us the background to formulate an unbiased opinion. Plus, appraisers must follow a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Licensing and certification takes coursework, tests and real world experience. Once an appraiser is licensed, he/she is required to engage in continuing education courses so the license remains current. To see the specific requirements for any state click here.

Who do appraisers work for?   (Back to top)

Mortgage lenders are an appraiser's typical client, requiring their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Polk County or other areas?   (Back to top)

Collecting data is one of the primary functions of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.

General data is collected from a number of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To verify actual sales prices, we look at items in the assessor's office and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.

And most importantly, the appraiser gathers 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 a financial decision. If you're selling your home, an appraisal helps you set the most appropriate price. When buying, you can avoid overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from Bates Real Estate & Appraisals, Inc. is the best way to ensure assets are divided fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.


What exactly is PMI and how can I get rid of it?   (Back to top)

PMI is an acronym for Private Mortgage Insurance. It covers the lender if a borrower is unable to pay on the loan and the value of the house 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 your monthly loan payment have a lineitem for PMI?Call Bates Real Estate & Appraisals, Inc. today at 863-638-2203 or send us an e-mail. Documentation of your home's current value could save you thousands.

Should I do anything in advance of the appraisal appointment   (Back 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 condition of its amenities. On the home's interior, pick up any clutter and make sure we can get 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.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Any information on the purchase of the property for the last three years.
  • A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
  • A list of any major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • Most recent real estate tax bill from Polk and or legal description of the property.

What does "Market Value" mean?   (Back to top)

In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:

"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."



Who actually owns the appraisal report?   (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 certainly 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 hires an appraiser directly. In these situations, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.


Are some home improvements more worthwhile than others?   (Back to top)

This really depends on where the home is. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.

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 are right up there with kitchens, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.