Professional Appraisal Group has answers to “Frequently Asked Questions”
Define the term “Appraisal”
The method of creating an appraisal deals with an inspection which forms an opinion of value. This opinion or estimate is discerned using a formal process that usually uses the three main “common approaches to value”. The Cost Approach is one of the approaches that appraisers use to find the value of a property; it involves figuring what the improvements would cost less physical deterioration, plus the land value. The most common approach in figuring the value of a house is the Sales Comparison Approach which concerns concluding a comparison to comparable houses close by. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. One of the least common approaches in appraising homes 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 income produced by the building.
What does an appraiser do?
An appraiser offers a professional, unbiased assessment of market value, to be used in making real estate transactions. Appraisers show their conclusions in appraisal reports.
Why would a person request services from Pro Appraisal Group?
There are a lot of reasons to order an appraisal from Professional Appraisal Group with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
- If you are applying for a loan.
- If you would like to lower your property tax obligations.
- To demonstrate a homeowner’s acquired equity and remove insurance.
- To challenge high property taxes.
- To deal with an estate.
- To give you a leg-up when purchasing a home.
- To determine an honest property value when putting your home on the market.
- To ensure parties are provided just compensation in eminient domain cases.
- Government agencies such as the IRS require an appraisal on every property.
- It’s possible you could be involved in a lawsuit – an appraisal will definitely help.
What is the difference between an appraisal and a home inspection?
Home inspectors do not come to an opinion of value and are not appraisers. The purpose of a home inspection is to evaluate the structure of the house from basement to rooftop. For the most part, a home inspection report will discuss the amenities and the necessities of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis (CMA)?
To be honest, they have nothing in common. What the CMA depends on are ill-defined trends. Appraisals use comparable sales which are verifiable resources. The appraisal report will also contain location and construction prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value. The person behind the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA’s. A certified, Michigan licensed professional who made a career on valuing real estate in and around Oakland County is behind the appraisal. Moreover, the appraiser is an unbiased voice, with no conditional interest in the value of a home, unlike the agent, whose income is tied to the price of the home.
What does the appraisal report contain?
The main purpose of an appraisal report is to give a value opinion, and depending on the scope of the report, you’ll usually see the following:
- The client and whose purposes the appraisal is to serve.
- The intended use of the appraisal.
- The appraisal’s purpose.
- Precisely what “value” attribute is being reported and what that value means.
- The effective date of the appraiser’s opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
- Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible considerations.
- Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
- Division of interest, such as fractional interest, physical segment and partial holding.
- The scope of work used while working up the appraisal.
For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report
Upon completion of the report, how can I have assurance that the final number is veritable?
In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
- That the information analysis contained in the appraisal was suitable.
- Whether individually or collectively, there were no major errors contained in the appraisal, nor any relevant details left out.
- That appraisal services were not conducted in a careless or negligent manner.
- The final appraisal report was clear, legitimate and conclusive.
To become a state licensed appraiser, there are extensive education requirements as well as on the jobexperience that must be attained – all with the end goal of gaining the skills required to provide unbiased value opinions. In addition, appraisers must stick to a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP). Licensing and certification takes coursework, tests and experience working under a supervisor. Once an appraiser is licensed, he/she is required to engage in continuing education courses so the license remains up to date. To see the specific requirements for any state click here.
Who engages the services of appraisers?
Mortgage lenders are an appraiser’s most likely customer, needing 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 Professional Appraisal Group get the information used to estimate values in Oakland County or other areas?
Collecting information is one of the primary roles of an appraiser. 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 noted by the appraiser during an inspection. General data is gathered from a variety of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. To verify actual sales prices, we look at tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode’s InterFlood product. And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
How can a licensed appraiser help me? (Top)
An appraisal is a worthwhile whenever your home’s value is pertinent to a financial decision. If you’re selling your house, an appraisal will help you determine the most appropriate price. If you’re buying, it makes sure you don’t overpay. For people settling an estate or divorce, an appraisal from Professional Appraisal Group is the best documentation to ensure assets are split up properly. A home 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?
PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary plan protects the lender if a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan. You can have your PMI dropped once you’ve achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal inspection
We begin with an inspection of the home. 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 shrubs and relocate any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can get to items like furnaces and water heaters. To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
- Records on the latest purchase of the property in the last three years.
- A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
- Information on “Homeowners Associations” or condominium covenants and fees.
- A list of any major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
- Most recent real estate tax bill from Oakland and or legal description of the property.
Define “Market Value”
In real estate appraising, 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.”
Does the appraisal belong to the bank or the consumer?
For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 certainly 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 scenarios, the appraiser may stipulate the purpose of the appraisal; 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?
The answer to this is different depending upon the location of the home. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast! 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 weren’t far behind, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn’t then become overbuilt for your neighborhood in terms of size.