American Dream Home Appraisal & Inspection Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The appraisal process is an evaluation that produces an opinion of value. This opinion or estimate is discerned by a formal process that generally utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the home, less the depreciation and physical deterioration, plus the land value. The Sales Comparison Approach deals with searching for comparable homes in close proximity and figuring out the value based on making a comparison of those prior sales to the home being investigated. Being the most popular approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a house. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.
Describe what an appraiser does(Return to top) An appraiser generates an objective and well supported opinion of market value, in the support of real property transactions. Appraisers document their professional findings in appraisal reports.
Why would a person need a real estate appraisal?(Return to top) There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Simply put, it's like comparing opera to country. What the CMA depends on are ill-defined trends. An appraisal utilizes comparable sales that can be validated by public record. The appraisal report will also include neighborhood and construction prices. 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.
The credentials of the person creating the report is actually the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, Ohio licensed professional who bases a career on valuing real estate in and around Trumbull County creates the appraisal. Moreover, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the price of the home.
What's in an appraisal report? (Return to top)Every appraisal must reflect a supported estimate of value and must clearly state the following:
Once the report has been delivered, what assurance is there that the value conclusion is legitimate?(Return to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Return to top) Mortgage lenders are an appraiser's most likely customer, using their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Trumbull County or other areas?(Return to top) Gathering data is one of the main tasks an appraiser does. 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 while on site.
General data is collected from a many places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is retrieved 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 collective knowledge gained from doing assignments for other properties in the same market.
Why do I need a professional appraisal?(Return to top) If you're involved in any kind of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to determine 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. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from American Dream Home Appraisal & Inspection Service is the best documentation to ensure assets are split up properly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making smart financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. This supplemental plan covers the lender in case a borrower defaults on the loan and the market price 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 appointment(Return 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. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. On the inside, make sure we can easily access appliances like furnaces and water heaters.
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?(Return to top) In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report?(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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may define 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.
How can I get the most ROI out of home improvements?(Return 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!
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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also help 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.