FREQUENTLY ASKED QUESTIONS

WHAT IS AN APPRAISAL?

The method of writing an appraisal report deals with an evaluation which leads to an opinion of value. the appraiser will use several approaches to come to the estimation of worth. One of the processes is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another process is the Sales Comparison Approach - which involves finding a comparable analysis to other similar properties within a close proximity which have recently sold. The Income Approach is mainly used for figuring out the worth of income-producing properties based on what an investor would pay based on the amount of capital a property produces.

WHAT DOES AN APPRAISER DO?

An appraiser is a key party in deciding the cost of a house. An appraiser makes an unbiased and professional opinion on the value of a property used in a real estate transaction. Appraisers display their professional investigations in appraisal reports.

WHY DO I NEED A HOME APPRAISAL?

The most common reason for needing a home appraisal is for real estate and mortgage transactions. Some other reasons for ordering a report may include:

  • If you are applying for a loan

  • If you would like to reduce your property tax obligations

  • To establish the replacement cost of Primary Mortgage Insurance

  • To contest high property taxes

  • If you need to take care of an estate

  • To offer you a negotiating tool when purchasing real estate

  • To find a reasonable property value when selling real estate

  • to defend your rights in a condemnation case

  • Because an official agency such as the IRS requires it

  • If you ever find yourself in a lawsuit

WHAT IS THE DIFFERENCE BETWEEN AN APPRAISAL AND A HOME INSPECTION?

Appraisers do not provide home inspections and are not home inspectors. An inspection is a third-party evaluation of the livable structure and electrical and mechanical systems of a house.

WHAT DOES THE APPRAISAL REPORT CONTAIN?

Each report must reflect a credible estimate of value and must identify the following:

  • The client and other intended users

  • The intended use of the report

  • The purpose of the assignment

  • The type of value reported and the definition of the value reported

  • The effective date of the appraisers opinions and conclusions

  • Relevant property characteristics, including location attributes, physical attributes, legal attributes, economic attributes, the real property interest valued, and non real estate items included in the appraisal, such as personal property, including trade fixtures and intangible items

  • All known: easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature

  • Division of interest, such as fractional interest, physical segment and partial holding

  • The scope of work used to complete the assignment

HOW ARE APPRAISERS CERTIFIED?

Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, they are required to take continuing education courses in order to keep the license current.

WHERE DOES AN APPRAISER GET THE INFORMATION USED TO ESTIMATE VALUE?

Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the home itself. Locations, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as Metro Appraisals' InterFlood product. Most importantly, the appraisers gathers general data from their past experience in creating appraisals for other properties in the same market.

HOW DO I GET READY FOR AN APPRAISAL?

The first step in most appraisals is the home inspection. During this process, the appraiser 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house. Trim any bushes 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:

  • A survey of the house and property

  • A deed or title reports showing the legal description

  • A recent tax bill

  • A list of personal property to be sold with the house if applicable

  • A copy of the original plans

WHAT IS "MARKET VALUE?"

Market value or fair market value is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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:

  1. Buyer and saller are typically motivated

  2. Both parties are well informed or well advised

  3. A reasonable time is allowed for exposure to the open market

  4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto

  5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sale concessions granted by anyone associated with the sale