RJ Larson, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) The procedure of creating an appraisal consists of an estimation which leads to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or estimate. The Cost Approach is one of the processes that real estate appraisers use to find value; it involves finding what the improvements would cost less physical depreciation, plus the land value. The Sales Comparison Approach involves finding similar properties nearby and discovering the value based on making a comparison of those properties to the home being appraised. The Sales Comparison Approach is normally the most accurate and best indicator of value for a home. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Back to top) An appraiser generates a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers document their expert investigation in appraisal reports.
What are the reasons a person would require a real estate appraisal?(Back to top) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an appraisal 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 point of a home inspection is to investigate the structure of the property from foundation to rooftop. Commonly, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible 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. The CMA utilizes market trends to generate most of their business. The appraisal is based on similar verifiable comparable sales. The appraisal report will also contain area and building prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor 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 bases their livelihood on valuing real estate in and around Kent County creates the appraisal. Further, the appraiser is an independent party, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.
What can I expect to see in my appraisal report? (Back to top)Each report should indicate a supported estimate of value and must clearly state the following:
Once the report has been completed, how can I have a guarantee that the value indicated is trustworthy?(Back to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who hires RJ Larson, Inc.(Back to top) Mortgage lenders are an appraiser's most likely client, requesting their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does RJ Larson, Inc. get the data used to estimate values in Kent County or other areas?(Back to top) One of the most important things an appraiser does is to collect property data. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is received from a numerous sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To double-check actual sales prices, we look at items in the assessor's office and other public documents that are usually online nowadays. 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 product.
And last but not least, the appraiser assimilates general data from his or her past experience in creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(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 helps you set the most appropriate price. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from RJ Larson, Inc. is the best way to ensure assets are divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is short for for Private Mortgage Insurance. It guards the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(Back 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 condition of its features. 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 shrubs and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.
To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
What does "Market Value" mean?(Back to top) In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report?(Back to top) For mortgage transactions, the lender orders 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 certainly entitled to a copy of the appraisal - it's usually bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate 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.
I want to get more for my house. Where should I spend money renovating?(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, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.