Monroe/Owen Appraisal, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) An appraisal report is an investigation that concludes with an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or valuation. One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, minus depreciation and physical dilapidation, adding the land value. Another of the approaches is the Sales Comparison Approach - which deals with finding a comparison to other similar nearby properties which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. 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 capital a property would bring in.
What does an appraiser do?(Return to top) An appraiser provides a fair and credible assessment of market value, often in the context of a real estate exchange. Appraisers demonstrate their findings in appraisal reports.
Why would a person request a real estate appraisal?(Return to top) There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal include:
Is an appraisal the same as a home inspection? (Return to top)Home inspectors do not generate an opinion of value and do not use the same forms as appraisers. A third-party home inspector will evaluate the structure of the house, from the top to the bottom. Usually, a home inspection report will explain the amenities and the necessities of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Frankly, it's night and day. What the CMA depends on are superficial trends. The appraisal relies on similar valid comparable sales. Location and building costs are also a priority in an appraisal. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is who's doing the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Indiana licensed professional who bases their livelihood on valuing homes in and around Owen County is behind the appraisal. 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 can I expect to see in my appraisal report? (Return to top)Each appraisal must indicate a believable estimate of value and will document the following:
Upon completion of the report, what guarantee is there that the final number is veritable?(Return to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(Return to top) Commonly, appraisers are hired by lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Monroe/Owen Appraisal, Inc. get the data used to estimate values in Owen County or other areas?(Return to top) One of the main tasks an appraiser engages in is to collect data. Data can be classified as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is gathered from a variety of places. To look up recent sales to be used as "comps", we typically go to the local Multiple Listing Service. To verify actual sales prices, we research tax records and other public documents that are usually online nowadays. Appraisers often need to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
What can a full appraisal do for me?(Return to top) An appraisal is a worthwhile anytime the value of your home is pertinent 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, be sure you're not overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from Monroe/Owen Appraisal, Inc. is the best way to ensure assets are divided evenly. 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?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. It guards the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes 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?(Return to top) We begin 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 condition of its amenities. Inside, make sure it is clutter free and that we can get to things like furnaces and water heaters. In the yard, trim any landscaping 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:
Define "Market Value"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return to top) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 appraisal - 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may stipulate how the appraisal can be used; 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.
I want to get more for my house. Where should I spend money renovating?(Return to top) Like all things real estate, this is dependent on a home's location. For example, putting in 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 were second, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.