What is an appraisal?
An appraisal is a thought process leading to an opinion of value. This opinion is arrived at through a formal process that typically uses the three ''common approaches to value''. They are the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Sales Comparison Approach - which involves making a comparison to other similar, nearby properties which have recently sold. The third approach is the Income Approach- which involves estimating what an investor would pay based on the income produced by the property. The approaches utilized with depend on the intended use of the assignment and the subject property.
What does an appraiser do?
An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports.
Why would a person need a home appraisal?
There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
- To obtain a loan.
- To lower your tax burden.
- To establish the replacement cost of insurance.
- To contest high property taxes.
- To settle an estate.
- To provide a negotiating tool when purchasing real estate.
- To determine a reasonable price when selling real estate.
- To protect your rights in a condemnation case.
- Because a government agency such as the IRS requires it.
- If you are involved in a lawsuit.
What is the difference between an appraisal and a home inspection?
The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party evaluation of the accessible structural and mechanical systems of a house, from the roof to the foundation. The standard home inspector's report will include an evaluation of the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.
What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?
An appraisal is an independent and unbiased opinion of value. The appraiser is an unbiased third party who does not have an interest in any future event related to their conclusions.
A CMA or market analysis of your property is completed by a party who is interested in persuading their customer into listing a property with them or selling a property to a person who they represent. A CMA does not provide an opinion of value, however provides an opinion of price for which a property will or should bring through a specific set of marketing efforts or facts. This opinion of price and the set of facts may or may not represent what would be part of the opinion rendered under the definition of value by an appraiser performing an appraisal.
What does the appraisal report contain?
The most common report level requested is the Summary Appraisal Report, each report must reflect a credible opinion of value and must identify the following:
- The client and other intended users.
- The intended use of the report.
- The purpose of the assignment.
- The type of value reported and the definition of the value reported.
- The effective date of the appraiser's opinions and conclusions.
- Relevant property characteristics, including location attributes, physical attributes, legal attributes, economic attributes, the real property interest valued, and Non real estate items included in the appraisal, such as personal property, including trade fixtures and intangible items.
- All known: easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
- Division of interest, such as fractional interest, physical segment and partial holding.
- The scope of work used to complete the assignment.
For a more detailed look at what is required in each level of appraisal reporting click here: http://www.uspap.org/
After completing the report, what assurance is there that the value indicated is valid?
All our appraisers are licensed by the state. Also many hold designations in professional organizations which require adherance to ethical standards. Each appraisal is quality checked for compliance with applicatable regulations. Our appraisers conclusions for typical appraisal activies are covered by an insurance policy covering errors and omissions.
How are appraisers certified?
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. Presently those seeking licensure in Ohio must complete several hundred tested classroom hours of coursework related to appraisal, work under a Certified Appraiser for more than 2 years, and possess a college degree or have completed many college credits.
All Pointer Appraisal Services appraisers are required to have a Bachelors, Masters, or Doctorate degree.
Who do appraisers work for?
Appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate value?
Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the property itself. Location, condition, amenities, size and other specific data are gathered by the appraiser during a viewing.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. 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 product. And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal?
Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your home, an appraisal helps you set the most appropriate value. 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. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can the right financial decisions.
How do I get ready for the appraiser?
The first step in most appraisals is the viewing inspection. During this process, the appraiser will come to propety and measure it, determine the layout of the interior, confirm all aspects of the building's general condition, and take photos of the property for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the interior and exterior of the building. Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure that the appraiser can easily access items like furnaces and water heaters.
For residential properties, make sure the appraiser can access the attic and crawl spaces in case the client requires them to be viewed.
The following Items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
- A survey of the property.
- A deed or title report showing the legal description.
- A copy of the original plans.
- A list of improvements completed in the past few years, their permit numbers, and contractor costs.
- If the property has sold, is under contract, or has been recently listed; copies of contracts, closing statements, or listings as applicable.
What is ''Market Value?''
Market value or fair market value is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) 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.
Source: OCC, FNMA
Who Actually Owns the Appraisal Report?
The opinions and conclusions contained in an appraisal report are the intellectual property of the Appraiser and Pointer Appraisal Services LLC.
The client and intended users as noted in reports or engagements are permitted to utilize the report for the intended use noted in the engagement.
In most real estate lending transactions, the appraisal is ordered by the lender. While the borrower may pays for the report as part of the application or closing costs, the lender retains the right to use the report or any information contained within for the purpose of making a decision on underwriting the loan. Sometimes, the borrower is entitled by law or regulation to a copy of the report. Borrowers should consult an attorney to determine if their situation provides them the legal right to a copy of an appraisal report.
The client of an assignment is identified at engagement and the client must approve the transmittal of the assignments results to all parties, with the exception those authorized by law or regulation. Therefore, the appraiser cannot provide results or copies of a report to outside parties without the approval of the client.
Which home renovations add the most to the price?
The answer to this is different depending upon the location and submarket of the dwelling. Different markets value amenities differently. Adding a bath to a small one bath dwelling may return more than adding a 6 or 7th bath to a larger dwelling when measured as a percentage of sales price.
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 were second, returning 85%. However, the Northeast Ohio market has a wide variance from national average in renovation costs and return on investment.
The only way to determine an opinion of a specific renovation is to engage the services of a competent appraiser.
