DB Appraisal Ltd has answers to "Frequently Asked Questions"
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Describe an appraisal
Describe what an appraiser does
What are the reasons I would need your services?
Is an appraisal the same as a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What can I expect to see in my appraisal report?
Once the report has been delivered, what guarantee is there that the value indicated is accurate?
How difficult is it to become certified?
Who employs appraisers?
Where does DB Appraisal Ltd get the data used to estimate values in Providence County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
Do you need anything from me in advance?
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
I want to get more for my house. Where should I spend money renovating?
Describe an appraisal (Back to top)
An appraisal report is an evaluation leading to an opinion of value.
This opinion or estimate is figured using a formal method that usually uses three "common approaches to value".
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 deterioration, plus the land value.
The Sales Comparison Approach involves searching for comparable homes nearby and figuring out the value based on comparing those homes to the home being investigated.
The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a home.
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 capital generated by the property.
Describe what an appraiser does (Back to top)
An appraiser generates an unprejudiced and well substantiated assessment of market value, to be used in making real estate transactions.
Appraisers present their professional conclusions in appraisal reports.
What are the reasons I would need your services? (Back to top)
There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions.
Some other reasons for obtaining an appraisal include:
Click here for a more extensive explanation of the process of getting an appraisal.
- To get a loan.
- To reduce your property taxes.
- To demonstrate a homeowner's acquired equity and remove PMI.
- To contest high property taxes.
- If you need to settle an estate.
- To offer you an edge when purchasing real estate.
- To find the most probable property value when selling real estate.
- To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
- Government agencies such as the IRS require an appraisal on every property.
- If you are ever involved in a civil case.
The appraiser is not a home inspector and he or she does not do a comprehensive home inspection.
The point of a home inspection is to evaluate the structure of the house from basement to attic.
Commonly, a home inspection report will discuss the amenities and the requirements of the property: 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)
Frankly, they share nothing in common.
The CMA relies on vague trends in the market.
Appraisals use comparable sales which are verifiable resources.
In addition, the appraisal checks other factors like condition, area and building costs.
All a CMA does is generate a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
Who's behind 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.
The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties.
Moreover, the appraiser is an independent party, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.
The main purpose of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report
- The client and whose purposes the appraisal is to serve.
- How the appraisal is supposed to be used.
- The appraisal's purpose.
- The type of value contained and a definition of the value reported.
- The effective date of the appraisal.
- Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible factors.
- Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
- Division of interest, such as fractional interest, physical segment and partial holding.
- What was included in the process of completing the assignment.
Once the report has been delivered, what guarantee is there that the value indicated is accurate? (Back to top)
In the documentation of an appraisal, each appraiser must make sure of the following:
To become a state licensed appraiser, we must meet intense education and experience requirements that train us to formulate an unbiased opinion.
Plus, appraisers must follow a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- The appraisal used a suitable analysis of the data.
- Whether individually or collectively, there were no crucial errors contained in the appraisal, nor any relevant details left out.
- That appraisal services were not executed in a careless or negligent manner.
- The final appraisal report was understandable, credible and not easily discredited.
(Back to top)
Licensing and certification is achieved through coursework, tests and real world experience.
Once an appraiser is licensed, he/she must then complete continuing education courses in order to keep the license current. To see the specific requirements for any state click here.
Who employs appraisers? (Back to top)
Mortgage lenders are an appraiser's typical customer, requiring their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does DB Appraisal Ltd get the data used to estimate values in Providence County or other areas? (Back to top)
Collecting information is one of the primary tasks an appraiser engages in.
Data can be categorized as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.
General data is received from a numerous places.
Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables.
Tax records and other courthouse documents reveal 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 gathers general data from his or her past experience in creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser? (Back to top)
If you're making some sort of financial decision and the value of your home matters, you'll want to hire a licensed appraiser.
When selling your house, an appraisal helps you set the most appropriate price.
When buying, be sure you're not 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 home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it? (Back to top)
PMI is the common abbreviation for for Private Mortgage Insurance.
It protects the lender if a borrower doesn't pay on the loan and the value of the home 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.
The savings from cancelling your PMI pays for the appraisal in no time. DB Appraisal Ltd stays current with real estate value trends in Johnston and Providence County. Contact us today.
Do you need anything from me in advance? (Back to top)
The first step in most appraisals is the property 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.
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 (gates aren't locked, etc). Trim any landscaping and relocate any items that would make it difficult to 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:
- A survey or plot map of the property and building (if readily available).
- Information on any written private agreements, such as a shared driveway with a neighbor.
- Title policy that describes encroachments or easements.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
- Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
How does an appraiser define "Market Value"? (Back to top)
In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."
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 included 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 scenarios, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating? (Back to top)
It really depends on the market.
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
No matter where you go, however, renovating a kitchen is almost always a safe investment.
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 were second, returning 85%.
On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.