Terry Higgins Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top)The appraisal process is an estimation that produces an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. One of the methods in use is the Cost Approach, which is what it would cost to replace the improvements to the house, less the depreciation and physical dilapidation, adding the land value. The Sales Comparison Approach deals with searching for comparable properties in the vicinity and discerning value based on comparing those prior sales to the home in question. The Sales Comparison Approach is commonly the most accurate and clearest 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 deals with estimating what an investor would pay based on the money generated by the property.
Describe what an appraiser does(Return to top)An appraiser produces a professional, unbiased determination of market value, in the support of real property transactions. Appraisers reveal the details of their professional investigation in appraisal reports.
Why would a person need a real estate appraisal?(Return to top)There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
How is an appraisal different than a home inspection? (Return to top)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. The purpose of a home inspection is to evaluate the structure of the house from basement to top. Generally, a home inspection report will evaluate the amenities and the requirements of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top)Simply, they have nothing in common. The CMA relies on indistinct market trends. The appraisal relies on similar definite comparable sales. Also, the appraisal verifies other factors like condition, neighborhood and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person doing the report. 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 produce by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent voice, with no conditional interest in the value conclusion, unlike the real estate agent, who gets a commission based upon the price of the home.
What can I expect to see in my appraisal report? (Return to top)The main objective of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
After completing the appraisal, how can I have confidence that the value conclusion is valid?(Return to top)In the documentation of an appraisal, each appraiser must make sure of the following:
Who engages the services of appraisers?(Return to top)Typically, appraisers are called upon by lenders to render a value opinion on a house involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Fulton County or other areas?(Return to top)Compiling data is one of the primary roles of an appraiser. Data can be divided into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Return 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. If you're selling your home, an appraisal will help you determine 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. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right 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. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the property is lower 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.
How do I get ready for the appraiser?(Return to top)The first step in most appraisals is the home 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. Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
How does an appraiser define "Market Value"?(Return to top)In real estate appraising, Market Value is commonly defined as:
Who has rights to 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 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.
This rule doesn't apply when a home owner hires an appraiser directly. In these situations, 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)The added value of a particular amenity truly depends on the local market. 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 most value returned from renovating a home comes in the kitchen. 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%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.