Accurate Appraisal and Review Service, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) An appraiser provides an evaluation that leads to an opinion of value. This opinion or estimate is arrived at using a formal method that generally uses the three main "common approaches to value". The Cost Approach is one of the methods that appraisers use to find value; it involves figuring what the improvements would cost without physical degradation, plus the land value. Another of the processes is the Sales Comparison Approach - which deals with making a comparison to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the capital generated by the property.
What does an appraiser do?(Back to top) An appraiser offers a professional, unbiased opinion of market value, often in the context of a real estate purchase. Appraisers demonstrate their professional analysis in appraisal reports.
What would cause me to request a real estate appraisal?(Back to top) There are many reasons to get an appraisal from Accurate Appraisal and Review Service, Inc. with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal include:
Is an appraisal the same as a home inspection? (Back to top)Appraisers do not do perform home inspections and are not home inspectors. A third-party home inspector will judge the structure of the property, from the top to the bottom. Commonly, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) To be blunt, it's like comparing Shakespeare to reality TV. What the CMA relies upon are superficial trends. An appraisal relies on comparable sales that can be proven by public record. Also, the appraisal checks other factors like condition, location and building costs. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
Who's behind the report is actually the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no conditional interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.
What can I expect to see in my appraisal report? (Back to top)Every appraisal should demonstrate a supported value opinion and should clearly state the following:
Upon completion of the report, what assurance is there that the final number is veritable?(Back to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who are an appraiser's customers?(Back to top) Commonly, appraisers are called upon by mortgage lenders to render a value opinion on a home involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Larimer County or other areas?(Back to top) Collecting information is one of the primary occupations of an appraiser. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is collected from a many sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. To double-check actual sales prices, we use tax records and other public documents. Appraisers routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Back to top) If you're involved in some sort of financial decision and the value of your home matters, you'll want a full appraisal. 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. 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?(Back to top) PMI stands for Private Mortgage Insurance. This added plan covers the lender in the event a borrower doesn't pay on the loan and the value of the property is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal inspection(Back to top) The first step in most appraisals is the property inspection. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside 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 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. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is entitled to a copy of the report - it's usually bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner hires 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.
Are some home improvements more worthwhile than others?(Back to top) The answer to this is different depending upon the location of the home. 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.
As a rule, the best ROI 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%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.