Magee Appraisal Service has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) The appraisal process is an evaluation that leads to an opinion of value. The real estate appraiser will typically use a few "approaches," typically three, to conclude the estimation of market value. The Cost Approach is one of the methods that real estate appraisers use to find the value of a home; it involves finding what the improvements would cost less physical degradation, plus the land value. The most common approach in finding the value of a house is the Sales Comparison Approach which involves making a comparison to comparable properties nearby. Being the most common approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residence. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.
What does an appraiser do?(Back to top) An appraiser forumlates a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers reveal the details of their findings in appraisal reports.
What would cause me to require a real estate appraisal?(Back to top) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an report include:
How is an appraiser different than a home inspector? (Back to top)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. A third-party home inspector will inspect the structure of the property, from the roof to the bottom. Generally, a home inspection report will discuss the amenities and the necessities of the home: 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Simply, they have nothing in common. The CMA relies on vague trends in the market. The appraisal relies on similar proven comparable sales. In addition, the appraisal looks at other factors like condition, location and replacement costs. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The person creating the report is actually the biggest difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, Nevada licensed professional who made a career on valuing homes in and around Washoe County is behind the appraisal. Further, the appraiser is an independent party, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
What's in an appraisal report? (Back to top)Every report must indicate a credible estimate of value and must document the following:
After completing the report, what guarantee is there that the value conclusion is veritable?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Back to top) Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Washoe County or other areas?(Back to top) Compiling information is one of the main tasks an appraiser does. Data can be divided into Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is collected from a variety of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To verify actual sales prices, we look at tax records and other public documents. Appraisers often have to report when a property lies 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 gathers general data from his or her past experience in doing assignments for other properties in the same market.
What can a full appraisal do for me?(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 determine a 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. 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?(Back to top) PMI is short for for Private Mortgage Insurance. This additional plan covers the lender in case a borrower is unable to pay on the loan and the market price of the property is less 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.
Do you need anything from me in advance?(Back 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. On the home's interior, pick up any clutter and make sure we can access 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.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "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 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 stipulate the purpose of the appraisal; 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.
Are some home improvements more worthwhile than others?(Back to top) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the best ROI 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 weren't far behind, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.