Hier & Associates has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) An appraisal is an inspection allowing the appraiser to come to an opinion of value. This opinion or estimate is found through the use of a formal method that usually utilizes the three main "common approaches to value". One of them is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. Easily the most common approach in finding the likely sales price of a home is the Sales Comparison Approach which involves concluding a comparison to similar homes nearby. Being the most popular approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a residence. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to determine the value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do?(Return to top) An appraiser provides a fair and credible opinion of market value, in the support of real property transactions. Appraisers show their professional conclusions in appraisal reports.
What are the reasons I would request your services?(Return to top) There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal report include:
What is the difference between an appraisal and a home inspection? (Return to top)Home inspectors do not produce an opinion of value and are not appraisers. A third-party home inspector will inspect the structure of the property, from the top to the bottom. The archetypal property inspector's report will include an evaluation of the integrity of the home's heating system, 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.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Frankly, it's apples and oranges. What the CMA relies upon are vague trends. The appraisal is based on similar proven comparable sales. The appraisal report will also contain neighborhood and construction prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person creating the report is actually the most significant difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, Illinois licensed professional who has formed a career on valuing real estate in and around Henry 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 previously agreed upon sum for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (Return to top)The main purpose of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
Once the report has been delivered, what guarantee is there that the final number is veritable?(Return to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(Return to top) Typically, appraisers are employed by lenders to estimate the value of property involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does an appraiser get the information used to estimate values in Henry County or other areas?(Return to top) One of the main things an appraiser does is to compile property data. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is collected from a number of sources. To find out about recently sold homes to be used as "comps", an appraiser will typically use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser assembles 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) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, 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. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI stands for Private Mortgage Insurance. It protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what is owed on 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) We begin with an inspection of the property. 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. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can get to appliances like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What does "Market Value" mean?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns 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 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; 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.
How can I get the most ROI out of home improvements?(Return to top) A home's location - what city it is in and even what part of that city - is key to this popular question. 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, an improvement that may not add value would be painting just for the sake of redecorating.