Adams Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal? (Return to top)The process of creating an appraisal report consists of an investigation which forms an opinion of value. This opinion or estimate is arrived at through a formal method that usually utilizes three "common approaches to value". One of the three is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The most common approach in finding the likely sales price of a home is the Sales Comparison Approach which involves figuring a comparison to comparable properties nearby. Being the most commonly used approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a property. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does (Return to top)An appraiser produces an impartial and well justified determination of market value, in the support of real property transactions. Appraisers exhibit their expert analysis in appraisal reports.
What would cause me to require a real estate appraisal? (Return to top)There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)? (Return to top)Frankly, it's night and day. The CMA depends on vague local market trends. An appraisal utilizes comparable sales that can be validated by public record. The appraisal report will also contain neighborhood and building values. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an independent party, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
What's in an appraisal report? (Return to top)The main purpose of an appraisal report is to give a value opinion, 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 indicated is valid? (Return to top)In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser? (Return to top)Commonly, appraisers are called upon by mortgage lenders to estimate the value of property involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Adams Appraisal Service get the information used to estimate values in Baldwin County or other areas? (Return to top)One of the most important things an appraiser does is to compile data. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a variety of places. To find out about recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. To verify actual sales prices, we use tax records and other public documents that are usually online nowadays. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser? (Return to top)An appraisal is a worthwhile anytime your home's value is relevant to a financial decision. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it? (Return to top)PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental plan guards the lender if a borrower is unable to pay on the loan and the value of the property is lower than the loan balance. 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)The first step in most appraisals is the property inspection. 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
Define "Market Value" (Return to top)In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer? (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 report - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner engages an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price? (Return to top)A home's location - what city it is in and even what part of that city - is key to this popular question. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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 help the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.