Desert West Appraisal Services has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) An appraisal report is an investigation leading to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser arrive at this opinion or estimate. One of the methods in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, less the age and physical dilapidation, adding the land value. The Sales Comparison Approach involves searching for similar properties in close proximity and figuring out the value based on comparing those homes to the home being investigated. The Sales Comparison Approach is commonly the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the capital generated by the property.
Describe what an appraiser does(Back to top) An appraiser forumlates an impartial and well supported assessment of market value, often in the context of a real estate exchange. Appraisers document their findings in appraisal reports.
What are the reasons someone would request your services?(Back to top) There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
How is an appraisal different than a home inspection? (Back to top)Home inspectors do not estimate an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the available structure and systems of a home, from the top to the bottom. Generally, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical systems, 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.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Honestly, they have nothing in common. What the CMA relies upon are ill-defined trends. Appraisals use similar sales which are verifiable resources. Location and building costs are also important in an appraisal. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person creating the report is hands down the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, state licensed professional who has formed their livelihood on valuing real estate in and around Mohave County is behind the appraisal. Further, the appraiser is an unbiased party, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
What does the appraisal report contain? (Back to top)Every appraisal should demonstrate a credible estimate of value and should clearly state the following:
Once the appraisal is done, what assurance is there that the final number is trustworthy?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Back to top) Mortgage lenders are an appraiser's typical customer, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Mohave County or other areas?(Back to top) Gathering data is one of the primary functions 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 documented by the appraiser while on site.
General data is collected from a many sources. To research recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers often have 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 assembles 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) An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. 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. If you're buying, it makes sure you don't overpay. 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.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is an acronym for Private Mortgage Insurance. This additional plan takes care of the lender in case a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan. 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.
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, make sure it is clutter free and that we can get to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.
To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back to top) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 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 scenarios, the appraiser may stipulate 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.
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, 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.
As a rule, the most value returned 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.