DELMAN APPRAISALS has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraisal report is a thought process that concludes with an opinion of value. This opinion or estimate is found through a formal process that typically utilizes three "common approaches to value". One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns finding a comparable analysis to other similar properties within a close vicinity which have recently sold. Being the most common approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a property. The Income Approach is mainly used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
Describe what an appraiser does(Return to top) An appraiser generates a fair and credible opinion of market value, to be used in making real estate transactions. Appraisers document their findings in appraisal reports.
Why would a person request a real estate appraisal?(Return to top) There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Frankly, they share nothing in common. The CMA uses market trends to generate most of their business. Appraisals use similar sales which are valid resources. In addition, the appraisal looks at other factors like condition, location and building prices. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is the person doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. A certified, state licensed professional who made a career on valuing properties in and around Riverside County creates the appraisal. Further, the appraiser is an unbiased party, with no vested interest in the property's value, unlike the real estate agent, whose income is tied to the price of the home.
What's in an appraisal report? (Return to top)Every report must reflect a believable estimate of value and must identify the following:
Once the appraisal has been delivered, what assurance is there that the value conclusion is legitimate?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers?(Return to top) Typically, appraisers are called upon by mortgage lenders to render a value opinion on a house involved in a loan transaction - to make sure the property is indeed adequate collateral for the loan. 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?(Return to top) Compiling data is one of the main things an appraiser engages in. Data can be categorized as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is gathered from a variety of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal?(Return to top) An appraisal is a valuable tool anytime the value of your home is pertinent to a financial decision. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. PMI takes care of the lender in case a borrower doesn't pay on the loan and the market price of the property is less 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.
How do I get ready for the appraiser?(Return to top) We start with an inspection of the property. 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 amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can get to appliances like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
What does "Market Value" mean?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return to top) 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 entitled to a copy of the appraisal - 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 hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price?(Return to top) It really depends on the market. 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. 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 were second, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.