Andrews & Associates Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The procedure of producing an appraisal report deals with an inspection which leads to an opinion of value. This opinion or estimate is found by a formal process that commonly utilizes the three main "common approaches to value". The Cost Approach is one of the approaches that appraisers use to find value; it involves concluding what the improvements would cost without physical depreciation, plus the land value. Another of the processes is the Sales Comparison Approach - which involves discovering a comparable analysis to other similar properties within a close proximity which have recently sold. The Sales Comparison Approach is normally the most accurate and clearest indicator of a liklely sales price for a home. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to determine the market value of a property based on what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(Back to top) An appraiser provides an objective and well supported determination of market value, often in the context of a real estate exchange. Appraisers show their conclusions in appraisal reports.
Why would a person require a real estate appraisal?(Back 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? (Back to top)The appraiser is not a home inspector and he or she does not do a comprehensive home inspection. An inspection is a third-party evaluation of the accessible structure and systems of a house, from the top to the bottom. The general house inspector's report will contain an evaluation of the condition of the house's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Back to top) Simply put, it's like comparing sugar and saccharin. What the CMA depends on are superficial trends. The appraisal relies on specific valid comparable sales. Location and building costs are also precedent in an appraisal. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The credentials of the person behind the report is actually the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. A certified, Tennessee licensed professional who made their livelihood on valuing homes in and around Sumner County creates 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 assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (Back to top)Every report should indicate a believable value opinion and will identify the following:
Once the appraisal has been completed, how can I have assurance that the value conclusion is valid?(Back to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers?(Back to top) Typically, appraisers are called upon by lenders to estimate the value of a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Sumner County or other areas?(Back to top) One of the primary tasks an appraiser performs is to assimilate property data. Data can be described 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 number of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. To verify actual sales prices, we research items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Back 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. For those selling a home, you'll want to figure out the 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. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Andrews & Associates Appraisals is the best way to ensure assets are divided evenly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
What exactly is PMI and how can I get rid of it?(Back to top) PMI stands for Private Mortgage Insurance. It guards the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
How do I get ready for the appraiser?(Back to top) The first step in most appraisals is the home inspection. 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. Inside, pick up any clutter and make sure 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 speed things along plus ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(Back to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. 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.
The exception to this rule is when a home owner hires an appraiser directly. 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.
How can I get the most ROI out of home improvements?(Back 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 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, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.