Bates Real Estate & Appraisals, Inc. has answers to "Frequently Asked Questions"
Describe an appraisal
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:
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:
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:
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.
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:
What does "Market Value" mean?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
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.