Hampton Roads Valuations has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal" (Back to top)The appraisal process is an evaluation that generates an opinion of value. The real estate appraiser will use a number of "approaches," typically three, to conclude the estimation of market value. One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with searching for comparable houses nearby and discovering the value based on making a comparison of those properties to the property being appraised. The Sales Comparison Approach is commonly the most accurate and best indicator of value for a residential property. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
Describe what an appraiser does (Back to top)An appraiser provides an impartial and well substantiated determination of market value, often in the context of a real estate sale. Appraisers document their expert findings in appraisal reports.
Why would a person need your services? (Back to top)There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
What is the difference between an appraisal and a home inspection? (Back to top)Appraisers do not do perform house inspections and are not home inspectors. An inspection is a third-party evaluation of the available structure and appliances of a house, from the roof to the foundation. The stereotypical house inspector's report will contain an evaluation of the condition of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)? (Back to top)Frankly, they have nothing in common. The CMA utilizes market trends to create most of their business. An appraisal relies on comparable sales that can be verified by public record. Also, the appraisal verifies other factors like condition, location and replacement 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.
But the most significant factor is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, Virginia & North Calolina licensed professional who has formed a career on valuing homes in and around Hampton Roads & North-East North Carolina creates the appraisal. Moreover, the appraiser is an unbiased party, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
What's in an appraisal report? (Back to top)The main point of an appraisal report is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
Once the appraisal has been completed, what guarantee is there that the value conclusion is accurate? (Back to top)In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers? (Back to top)Mortgage lenders are an appraiser's most likely customer, requiring their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Hampton Roads Valuations get the information used to estimate values in Hampton Roads or other areas? (Back to top)Compiling data is one of the primary activities of an appraiser. Data can be classified as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is received from a variety of 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 routinely 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 product.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
How can a licensed appraiser help me? (Back to top)An appraisal is a valuable tool anytime your home's value is pertinent to a financial decision. When selling your house, an appraisal helps you set a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from Premier Appraisal Group, Inc. is the best documentation to ensure assets are split up 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 protects the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Does the appraiser need anything from the homeowner 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. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any landscaping and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can get to appliances like furnaces and water heaters.
To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
Define "Market Value" (Back to top)In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report? (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 certainly entitled to a copy of the report - 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, 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.
I want to get more for my house. Where should I spend money renovating? (Back to top)The answer to this is different depending upon the location of the home. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 weren't far behind, returning 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.