An appraisal is a thought process allowing the appraiser to come to an opinion of value. This opinion or estimate is arrived at by using a formal process that usually utilizes the three main "common approaches to value". The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves figuring what the improvements would cost less physical depreciation, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparable analysis to other similar nearby properties which have recently sold. The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a home. One of the least common approaches in appraising houses is the Income Approach, which is mainly used to find the value of a property based on what an investor would pay based on the capital produced by the building.
An appraiser provides a fair and credible determination of market value, to be used in making real estate transactions. Appraisers exhibit their professional findings in appraisal reports.
There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an report include:
Appraisers do not do complete home inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the home from bottom to rooftop. Commonly, a home inspection report will discuss the amenities and the requirements of the home: 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.
Frankly, it's like comparing opera to country. The CMA utilizes market trends to create most of their business. The appraisal relies on similar definite comparable sales. The appraisal report will also include neighborhood and construction prices. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
Who's behind the report is hands down the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Arizona licensed professional who has formed their livelihood on valuing properties in and around Maricopa County creates the appraisal. Moreover, the appraiser is an unbiased voice, with no vested interest in the property's value, unlike the real estate agent, whose income is tied to the value of the home.
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:
In the documentation of an appraisal, each appraiser must make sure of the following:
To become a state licensed appraiser, we must fulfill intense education and experience requirements that enable us to formulate an unbiased opinion. Likewise, appraisers must abide by a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for carrying out an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification typically translates to many hours of coursework, tests and experience working under a supervisor. Once licensed, he or she must then complete continuing education courses in order to keep the license current.
Mortgage lenders are an appraiser's most likely client, using their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
One of the primary tasks an appraiser must accomplish is to assimilate data. Data can be divided into Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is collected from a many sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers routinely 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 gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
If you're involved in any kind of financial decision and the value of your home matters, you'll want an appraisal. For those selling a home, you'll want to determine a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from Hendrickson Appraisals is the best way to ensure assets are split up fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
PMI is an acronym for Private Mortgage Insurance. This additional policy takes care of the lender if a borrower defaults on the loan and the value of the home is lower than the loan balance. 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.
The amount you keep from cancelling the PMI required when you got your mortgage will make up for the price of the appraisal in no time. Nobody is more qualified than Hendrickson Appraisals when it comes to analyzing real estate appreciation in Maricopa and Pinal County
The first step in most appraisals is the property 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. Inside, pick up any clutter and make sure 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.
To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."
For mortgage transactions, the lender requests 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 entitled to a copy of the report - it's usually included 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 hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.
A home's location - what city it is in and even what part of that city - is key to this popular question. 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. Repairing or replacing an existing system typically does not increase the value by the cost of the new system.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, work that may not add value would be painting just for the sake of redecorating.