Bass, Houston & Associates, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraisal report is a thought process that concludes with an opinion of value. There are three "common approaches to value" which assists the real estate appraiser arrive at this opinion or valuation. One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the home, minus age and physical deterioration, adding the land value. The Sales Comparison Approach deals with finding similar homes in close proximity and discovering the value based on comparing those properties to the property being investigated. The Sales Comparison Approach is commonly the most accurate and best indicator of a liklely sales price for a residence. One of the least common approaches in appraising houses is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the building.
Describe what an appraiser does(Back to top) An appraiser offers a fair and credible opinion of market value, often in the context of a real estate exchange. Appraisers show their expert findings in appraisal reports.
Why would a person request services from Bass, Houston & Associates, Inc.?(Back to top) There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal report include:
How is an appraiser different than a home inspector? (Back to top)Appraisers do not do complete home inspections and are not home inspectors. A third-party home inspector will inspect the structure of the property, from the top to the bottom. For the most part, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, 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 other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) Frankly, it's like comparing sugar and saccharin. What the CMA relies upon are vague trends. An appraisal relies on comparable sales that can be validated by public record. Also, the appraisal verifies other factors like condition, neighborhood and building costs. 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 creating 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. The appraisal is produce by a licensed, certified professional who makes a living 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 collect only a flat fee for work they perform, regardless of their outcome.
What can I expect to see in my appraisal report? (Back to top)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, you'll usually see the following:
After completing the appraisal, what assurance is there that the value indicated is accurate?(Back to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(Back to top) Typically, appraisers are called upon by lenders to render a value opinion on a home involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Cobb County or other areas?(Back to top) Gathering data is one of the primary things an appraiser performs. Data can be divided into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is received from a many places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Appraisers often need to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Back to top) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to figure out the 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. 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 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 the common abbreviation for for Private Mortgage Insurance. PMI takes care of the lender in case a borrower defaults on the loan and the value of the home is less than what is owed on the loan. 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) 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 status of its features. On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What is "Market Value?"(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Back to top) 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 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.
The exception to this rule is when a home owner engages an appraiser directly. 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.
Which home renovations add the most to the price?(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, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI 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 were second, returning 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.