Home Chek Inspections has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraisal is a thought process allowing the appraiser to come to an opinion of value. This opinion or estimate is discerned using a formal method that commonly utilizes the three main "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, less the age and physical dilapidation, adding the land value. The most common approach in finding the value of a house is the Sales Comparison Approach which involves figuring a comparison to similar homes close by. Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residential property. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to find the value of a property based on what an investor would pay based on the capital produced by the building.
What does an appraiser do?(Back to top) An appraiser produces a fair and credible determination of market value, often in the context of a real estate exchange. Appraisers exhibit their analysis in appraisal reports.
What are the reasons a person would need your services?(Back 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 report include:
Is an appraisal the same as a home inspection? (Back to top)Appraisers do not do complete home inspections and are not home inspectors. An inspection is a third-party investigation of the available structure and appliances of a property, from the roof to the bottom. Generally, a home inspection report will explain the amenities and the necessities 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, exposed 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) To be blunt, it's like comparing Shakespeare to reality TV. The CMA uses market trends to conduct most of their business. The appraisal is reliant on similar valid comparable sales. Also, the appraisal looks at other factors like condition, neighborhood and building prices. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the largest differentiator is who's doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in 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 does the appraisal report contain? (Back to top)The main purpose of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Upon completion of the report, what guarantee is there that the value indicated is legitimate?(Back to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who do appraisers work for?(Back to top) Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Onslow County or other areas?(Back to top) One of the most important things an appraiser does is to assimilate property data. Data can be split into Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is collected from a variety of places. To find out about recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers often need 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 collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(Back to top) An appraisal is a valuable tool whenever the value of your home is pertinent to some financial decision. For those selling a home, you'll want to figure out a price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, you can avoid overpaying by getting 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. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is an acronym for Private Mortgage Insurance. It guards 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.
Do you need anything from me in advance?(Back to top) The first step in most appraisals is the home inspection. 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 we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back 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 report - 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may define 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) A home's location - what city it is in and even what part of that city - is key to this popular question. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.