ADK Appraisal Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) An appraisal is a thought process leading to an opinion of value. The real estate appraiser must use a few "approaches," typically three, to arrive at the estimation of market value. One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the home, minus depreciation and physical dilapidation, adding the land value. Another of the methods is the Sales Comparison Approach - which deals with discovering a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most commonly used approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to find the market value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do?(See list of FAQ's) An appraiser offers a professional, unbiased determination of market value, in the support of real property transactions. Appraisers illustate their professional conclusions in appraisal reports.
Why would someone request a real estate appraisal?(See list of FAQ's) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for getting an appraisal report include:
How is an appraisal different than a home inspection? (See list of FAQ's)Home inspectors do not produce an opinion of value and are not appraisers. The point of a home inspection is to evaluate the structure of the home from bottom to rooftop. Commonly, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, 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 other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(See list of FAQ's) To be honest, they share nothing in common. The CMA uses market trends to generate most of their business. An appraisal relies on comparable sales that can be verified by public record. Location and architectural values are also precedent in an appraisal. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person behind the report is frankly the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, state licensed professional who has formed their livelihood on valuing homes in and around Riverside County is behind the appraisal. Moreover, the appraiser is an unbiased voice, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.
What does the appraisal report contain? (See list of FAQ's)Each appraisal must demonstrate a believable value opinion and should document the following:
Once the report is done, what guarantee is there that the value indicated is veritable?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(See list of FAQ's) Mortgage lenders are an appraiser's most likely client, requesting their services to ensure a home 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 an appraiser get the data used to estimate values in Riverside County or other areas?(See list of FAQ's) Gathering data is one of the main tasks an appraiser engages in. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a many sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. To double-check actual sales prices, we use tax records and other public documents that are usually online nowadays. Flood zone data is gathered from FEMA data outlets, 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 properties in the same market.
Why do I need a professional appraisal?(See list of FAQ's) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. For those selling a home, you'll want to determine the 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, be sure you're not overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from ADK Appraisal Services is the best documentation to ensure assets are divided evenly. Simply put, 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?(See list of FAQ's) PMI is short for for Private Mortgage Insurance. This added plan protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Do you need anything from me in advance?(See list of FAQ's) The first step in most appraisals is the property 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. Inside, make sure it is clutter free and that 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 outside walls.
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?(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) 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 allowed 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 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 do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(See list of FAQ's) 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 live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, returning 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.