Underwood Appraisal Services, LLC has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) An appraiser performs an estimation that produces an opinion of value. This opinion or estimate is figured using a formal process that usually utilizes three "common approaches to value". One of the processes is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The most common approach in finding the likely sales price of a house is the Sales Comparison Approach which involves concluding a comparison to similar 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 residential property. The Income Approach is generally used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
What does an appraiser do?(See list of FAQ's) An appraiser generates a professional, unbiased assessment of market value, to be used in making real estate transactions. Appraisers exhibit their expert analysis in appraisal reports.
What are the reasons a person would need a real estate appraisal?(See list of FAQ's) There are a lot of reasons to order an appraisal from Underwood Appraisal Services, LLC with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)Home inspectors do not come to an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the livable structure and appliances of a property, from the roof to the foundation. Usually, a home inspection report will explain the amenities and the requirements of the home: 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(See list of FAQ's) To be honest, they have nothing in common. What the CMA depends on are superficial trends. Appraisals use similar sales which are valid resources. The appraisal report will also contain location and construction costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person creating the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for work they perform, regardless of their value conclusion.
What are the contents of an appraisal report? (See list of FAQ's)The main objective 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:
Upon completion of the report, what guarantee is there that the value indicated is valid?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(See list of FAQ's) Mortgage lenders are an appraiser's typical customer, requesting their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does Underwood Appraisal Services, LLC get the information used to estimate values in Hamilton County or other areas?(See list of FAQ's) One of the most important activities of an appraiser is to compile property data. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is gathered from a many sources. To research recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser assimilates 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?(See list of FAQ's) An appraisal is a valuable tool anytime the value of your home is relevant to a financial decision. When selling your house, an appraisal assists you in setting the most appropriate price. When buying, be sure you're not overpaying by commissioning an independent appraisal. 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. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(See list of FAQ's) PMI stands for Private Mortgage Insurance. This supplementary policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what is owed on 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.
How do I get ready for the appraiser?(See list of FAQ's) 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 status of its features. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.
To help speed things along plus ensure a more accurate report, try if possible to have the following items:
What is "Market Value?"(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(See list of FAQ's) 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 report - 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 cases, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(See list of FAQ's) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe move. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms are right up there with kitchens, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.