Dawson Appraisal Services, LLC has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The procedure of writing an appraisal report deals with an evaluation which forms an opinion of value. There are three "common approaches to value" which assists the appraiser conclude this opinion or valuation. The Cost Approach is one of the approaches that real estate appraisers use to find the value of a house; it involves finding what the improvements would cost less physical deterioration, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparable analysis to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The Income Approach is mainly used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does(Back to top) An appraiser produces a fair and credible opinion of market value, in the support of real estate transactions. Appraisers exhibit their expert investigation in appraisal reports.
What would cause me to request a real estate appraisal?(Back to top) There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
Is an appraisal the same as a home inspection? (Back to top)Appraisers do not do provide house inspections and are not home inspectors. The purpose of a home inspection is to evaluate the structure of the home from bottom to rooftop. The standard house inspector's report will contain an evaluation of the condition of the home's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Back to top) Frankly, it's night and day. The CMA relies on vague trends in the market. Appraisals use similar sales which are verifiable resources. In addition, the appraisal checks other factors like condition, neighborhood and replacement prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
Who's creating the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. 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 fee for assignments, regardless of their value conclusion.
What does the appraisal report contain? (Back to top)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:
Once the assignment is done, how can I have certainty that the value indicated 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) Commonly, appraisers are called upon by mortgage lenders to estimate the value of a home involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Orange County or other areas?(Back to top) One of the main things an appraiser does is to collect data. Data can be split into Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a numerous places. To research recently sold homes to be used as "comps", we typically use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers often need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
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.
How can a licensed appraiser help me?(Back to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by commissioning an independent appraisal. 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. Knowing its true value means you can make informed financial decisions.
What exactly is PMI and how can I get rid of it?(Back to top) PMI is an acronym for Private Mortgage Insurance. It guards the lender in the event a borrower is unable to pay on the loan and the market price of the home 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 appointment(Back to top) The first step in most appraisals is the home 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. On the home's interior, pick up any clutter and make sure we can access 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 expedite our work 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 (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Back to top) 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 entitled to a copy of the report - 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 hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Back to top) This really depends on where the home is. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
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 are right up there with kitchens, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.