Larry Scott Appraisal Service has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) An appraiser provides an estimation that produces an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or estimate. One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the house, minus depreciation and physical deterioration, adding the land value. The Sales Comparison Approach involves searching for comparable houses in the vicinity and finding value based on making a comparison of those homes to the property in question. Being the most commonly used approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property.
Describe what an appraiser does(See list of FAQ's) An appraiser forumlates an unprejudiced and well supported opinion of market value, in the support of real property transactions. Appraisers exhibit their expert investigation in appraisal reports.
What are the reasons I would request a real estate appraisal?(See list of FAQ's) There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
Is an appraisal the same as a home inspection? (See list of FAQ's)Home inspectors do not come to an opinion of value and do not do appraisal reports. A third-party home inspector will investigate the structure of the house, from the top to the bottom. The general house inspector's report will contain an evaluation of the integrity of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(See list of FAQ's) Simply put, it's like comparing sugar and saccharin. What the CMA depends on are superficial trends. Appraisals use similar sales which are valid resources. Location and building values are also a priority in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The credentials of the person behind the report is hands down the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, state licensed professional who made their livelihood on valuing real estate in and around Orange County is behind the appraisal. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the agent, whose income is tied to the price of the home.
What can I expect to see in my appraisal report? (See list of FAQ's)Each report must reflect a supported value opinion and should identify the following:
Once the report has been delivered, what guarantee is there that the final number is veritable?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who do appraisers work for?(See list of FAQ's) Mortgage lenders are an appraiser's most likely customer, needing their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Larry Scott Appraisal Service get the information used to estimate values in Orange County or other areas?(See list of FAQ's) One of the most important things an appraiser does is to compile property data. Data can be classified as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a number of sources. To research recent sales to be used as "comps", we typically go to the local Multiple Listing Service. To double-check actual sales prices, we research 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 houses in the same market.
What can a full appraisal do for me?(See list of FAQ's) 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(See list of FAQ's) PMI is short for for Private Mortgage Insurance. It guards the lender if a borrower defaults 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.
How do I get ready for the appraiser?(See list of FAQ's) We start with an inspection of the property. 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. Is there anything you can do to help? Yes there is! First, be sure we have 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. Indoors, make sure the appraiser can get to appliances like furnaces and water heaters.
You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
What is "Market Value?"(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(See list of FAQ's) In most real estate transactions, the appraisal is ordered by the lender. 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 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.
This rule doesn't apply when a home owner engages an appraiser directly. In these scenarios, the appraiser may state the purpose of the appraisal; 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.
Which home renovations add the most to the price?(See list of FAQ's) The added value of a particular amenity truly depends on the local 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. 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, work that may not add value would be painting just for the sake of redecorating.