Lee Appraisal Service, Inc. has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Go to list of questions) An appraisal is an estimation leading to an opinion of value. This opinion or estimate is discerned through a formal process that commonly uses three "common approaches to value". One of the methods in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the house, less the depreciation and physical deterioration, plus the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which deals with concluding a comparison to comparable houses nearby. The Sales Comparison Approach is commonly the most definitive and best indicator of value for a residence. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.
What does an appraiser do?(Go to list of questions) An appraiser forumlates a fair and credible assessment of market value, often in the context of a real estate exchange. Appraisers demonstrate their expert analysis in appraisal reports.
Why would I need services from Lee Appraisal Service, Inc.?(Go to list of questions) There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an report include:
How is an appraiser different than a home inspector? (Go to list of questions)Home inspectors do not estimate an opinion of value and do not do appraisal reports. A third-party home inspector will investigate the structure of the property, from the roof to the bottom. For the most part, a home inspection report will evaluate the amenities and the necessities 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Go to list of questions) Frankly, it's night and day. The CMA utilizes market trends to conduct most of their business. An appraisal is based on comparable sales that can be validated by records. The appraisal report will also include location and construction prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is who's creating 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. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an unbiased party, with no conditional interest in the value conclusion, unlike the agent, who gets a commission based upon the price of the home.
What's in an appraisal report? (Go to list of questions)The main objective of an appraisal report is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
Upon completion of the report, how can I have certainty that the value indicated is veritable?(Go to list of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who hires an appraiser?(Go to list of questions) Mortgage lenders are an appraiser's typical client, using their services to ensure a home 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 Lee Appraisal Service, Inc. get the data used to estimate values in Gates County or other areas?(Go to list of questions) One of the most important things an appraiser does is to gather property data. Data can be classified as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is gathered from a numerous sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often need 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 last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Go to list of questions) If you're making any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. 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, you can avoid overpaying by commissioning an independent appraisal. 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. 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?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the house 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?(Go to list of questions) 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 status of its features. On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
What does "Market Value" mean?(Go to list of questions) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Go to list of questions) 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 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 engaging 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 do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Go to list of questions) The answer to this is different depending upon the location of the home. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
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 weren't far behind, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.