Lundquist Appraisals & Real Estate Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(List of questions) An appraisal is an estimation that concludes with an opinion of value. This opinion or estimate is figured through a formal method that usually utilizes the three main "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, minus depreciation and physical deterioration, plus the land value. The Sales Comparison Approach involves searching for similar properties in the vicinity and figuring out the value based on comparing those properties to the property in question. Being the most common approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a home. One of the least common approaches in appraising houses is the Income Approach, which is generally used to find the value of a property based on what an investor would pay based on the income produced by the property.
Describe what an appraiser does(List of questions) An appraiser provides a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their professional investigation in appraisal reports.
What are the reasons I would request your services?(List of questions) There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
How is an appraiser different than a home inspector? (List of questions)The appraiser is not a home inspector and he or she does not do a full home inspection. The purpose of a home inspection is to evaluate the structure of the property from basement to top. The standard home inspector's report will contain an evaluation of the condition of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
My agent performed a CMA for me. Is that the same as an appraisal?(List of questions) To be blunt, it's apples and oranges. The CMA depends on indistinct trends in the market. The appraisal is based on specific proven comparable sales. The appraisal report will also contain location and building values. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is who's doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat sum for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (List of questions)The main objective of an appraisal document is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Upon completion of the report, what guarantee is there that the value indicated is valid?(List of questions) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(List of questions) Mortgage lenders are an appraiser's typical client, requiring 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 Wabash County or other areas?(List of questions) One of the most important activities of an appraiser is to gather data. Data can be split into Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a number of places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To double-check actual sales prices, we look at items in the assessor's office and other public documents. Appraisers routinely have 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 last but not least, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(List of questions) If you're involved in any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting 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. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(List of questions) PMI is an acronym for Private Mortgage Insurance. This additional policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what is owed 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.
Do you need anything from the homeowner in advance?(List of questions) The first step in most appraisals is the home inspection. During this process, we 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 shrubs and relocate any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access appliances like furnaces and water heaters.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
What is "Market Value?"(List of questions) 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?(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 hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may state how the appraisal can be used; 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.
Are some home improvements more worthwhile than others?(List of questions) A home's location - what city it is in and even what part of that city - is key to this popular question. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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, returning 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.