Appraising Capital has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) An appraisal is an evaluation leading to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser come to this opinion or estimate. One of the methods in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, less the age and physical deterioration, plus the land value. Another of the processes is the Sales Comparison Approach - which involves finding a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most popular 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 residential properties 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 building.
What does an appraiser do?(Back to top) An appraiser provides a fair and credible opinion of market value, in the support of real property transactions. Appraisers summarize their expert investigation in appraisal reports.
Why would a person need services from Appraising Capital?(Back to top) There are many reasons to order an appraisal from Appraising Capital with the usual reason being real estate and mortgage transactions. Other reasons for getting an report include:
How is an appraisal different than a home inspection? (Back to top)Home inspectors do not figure out an opinion of value and do not do appraisal reports. The purpose of a home inspection is to investigate the structure of the home from basement to attic. The usual property inspector's report will include an evaluation of the integrity 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)?(Back to top) Simply, they share nothing in common. The CMA relies on vague trends in the market. Appraisals use comparable sales which are valid resources. The appraisal report will also include neighborhood and construction prices. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person behind the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, state licensed professional who bases a career on valuing homes in and around Orange County creates the appraisal. Moreover, the appraiser is an unbiased party, with no vested interest in the property's value, unlike the real estate agent, whose income is tied to the price of the home.
What's in an appraisal report? (Back to top)The main point 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, one will customarily see the following:
After completing the report, how can I have a guarantee that the value conclusion is valid?(Back to top) In communicating an appraisal report, each appraiser must ensure the following:
Who hires an appraiser?(Back to top) Mortgage lenders are an appraiser's typical client, requesting their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Appraising Capital get the information used to estimate values in Orange County or other areas?(Back to top) Compiling data is one of the primary roles of an appraiser. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a variety of places. To find out about recent sales to be used as "comps", we 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 available from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Back to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine the 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. Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
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 policy takes care of the lender in case a borrower defaults on the loan and the value of the property is less than the balance of the loan. 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 home 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 status of its features. 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 bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access appliances like furnaces and water heaters.
You can make our visit go faster and improve the quality of the appraisal report by having the following things on hand:
What is "Market Value?"(Back to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Back to top) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 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.
The exception to this rule is when a home owner engages an appraiser directly. In these scenarios, 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.
I want to get more for my house. Where should I spend money renovating?(Back to top) Like all things real estate, this is dependent on a home's location. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 are right up there with kitchens, returning 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.