John Howard Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) The procedure of performing an appraisal report deals with an evaluation which leads to an opinion of value. The real estate appraiser will typically use a number of "approaches," typically three, to draw up the estimation of market value. One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which concerns figuring a comparison to comparable properties nearby. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to figure the value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(See list of FAQ's) An appraiser forumlates a fair and credible determination of market value, in the support of real estate exchanges. Appraisers illustate their professional conclusions in appraisal reports.
Why would a person request a real estate appraisal?(See list of FAQ's) There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal report include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)Home inspectors do not generate an opinion of value and do not do appraisal reports. The point of a home inspection is to evaluate the structure of the house from bottom to top. Generally, a home inspection report will explain the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(See list of FAQ's) Simply put, it's like comparing Shakespeare to reality TV. What the CMA depends on are ill-defined trends. An appraisal relies on comparable sales that can be proven by public record. The appraisal report will also include area and construction values. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the biggest difference is the person creating the report. 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 made a career on valuing homes in and around Iredell County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat sum for assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (See list of FAQ's)The main objective of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
After completing the report, how can I have certainty that the value indicated is legitimate?(See list of FAQ's) In communicating an appraisal report, each appraiser must ensure the following:
Who are an appraiser's customers?(See list of FAQ's) Mortgage lenders are an appraiser's most likely customer, requiring their services to ensure real estate 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 John Howard Appraisal Service get the data used to estimate values in Iredell County or other areas?(See list of FAQ's) Compiling information is one of the primary functions of an appraiser. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is received from a number of places. To find out about recently sold homes to be used as "comps", we typically use the local Multiple Listing Service. To double-check actual sales prices, we use tax records and other public documents. 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 product.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal?(See list of FAQ's) An appraisal is a valuable tool anytime your home's value is pertinent to a financial decision. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from John Howard Appraisal Service is the best documentation to ensure assets are split up properly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making smart financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is the common abbreviation for for Private Mortgage Insurance. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Should I do anything in advance of the appraisal inspection(See list of FAQ's) 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. 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 landscaping and relocate any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access appliances like furnaces and water heaters.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
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:
Once complete, who actually owns the appraisal report?(See list of FAQ's) For mortgage transactions, the lender orders 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 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 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) Like all things real estate, this is dependent on a home's location. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 are right up there with kitchens, returning 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 overbuilt for your neighborhood in terms of size.