What does an appraiser do? Back to top
An appraiser provides a professional, unbiased opinion of market value. It protects both lenders and buyers from commiting more money than a property value warrants. Various real estate transactions utilize the concretely documented valuation. Appraisers present their professional analyses in appraisal reports.
Why might someone need a home appraisal? Back to top
Most commonly appraisals are needed for real estate and mortgage transactions. However, there are many reasons to obtain an appraisal. Some other reasons include:
To get a loan.
To establish replacement cost.
To challenge high property taxes.
To settle an estate.
To use as a negotiating tool when purchasing real estate.
To figure out a reasonable price when selling real estate.
To protect your rights in a condemnation scenario.
To provide documentation to a government agency such as the IRS.
To help settle a lawsuit.
What is the difference between an appraisal and a home inspection? Back to top
The appraiser is not a home inspector nor does the appraiser do a complete home inspection. A home inspection is an evaluation of the accessible structure and mechanical systems of a house, from the foundation all the way up to the roof. The typical home inspector's report will thoroughly include an evaluation of the condition of the home's heating system, cooling system, interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure. Appraisers only do a very limited inspection for the purpose of determining the overall condition of the home being appraised, taking note of any remodeling and/or obvious needed repairs at the property.
How are appraisers certified? Back to top
Regulations regarding certification and licensing of Real Estate Appraisers vary from state to state. However, the certification process 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.
Whom do appraisers work for? Back to top
Usually, appraisers are consultants of lenders for valuation of real estate involved in a loan transaction. In this typical scenario of an appraisal ordered by a lender, the client of that lender (the real estate owner) is usually the one who pays for the appraisal. It is common for the real estate owner to believe that the appraiser is working for them (since they are the ones paying), however, this is not the case. Federal and state regulations are very clear that the appraisers work for the lender and not the home owner (otherwise there would be a conflict of interest). The real estate owner is entitled to a copy of the appraisal by law; however, they must obtain their copy through the lender and not the appraiser.
Where does the appraiser get their information? Back to top
Collecting data is one of the main roles of an appraiser. Data can be divided into Specific data and General data. Specific data is gathered from the home itself: Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a number of other 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; and also important, the appraiser gathers general data from past experience in creating appraisals for other properties in the same area.
Why do I need a professional appraisal? Back to top
Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal can help or might even be necessary. If you're selling your real estate, an appraisal helps you set the most appropriate value. If you're buying, it helps to ensure you don't overpay. If you're in an estate settlement or divorce, it makes sure that property is valued accurately. Real estate is often the single, largest financial asset anybody owns. Knowing its true value empowers the owner to make wise financial decisions.
What exactly is PMI and how can I get rid of it? Back to top
PMI stands for Private Mortgage Insurance. It insures a lender against loss on real estate purchased with a down-payment of less than 20%. Such mortgages include the premium cost. Once equity in the home reaches 20% you can eliminate the PMI and start saving money right away.
How do I get ready for the appraiser? Back to top
The first thing most appraisers will do is inspect the home. During this process, the appraiser will measure it, make note 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 ensure 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 that the appraiser can easily access items like furnaces and water heaters.
What is ''Market Value?'' Back to top
Market value or "fair market value" is the most probable price that a property should sell for in a competitive and open market with all the conditions necessary for a fair sale. This means having a buyer and seller that are both knowledgeable of the market area, and not having any undue influences that can affect the sales price (such as sellers who need to sell fast, or a buyer and seller that are related to each other). Implicit in this definition is the consummation of a sale of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller 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; and (5) 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.
Who actually owns the appraisal report? Back to top
In most real estate transactions, the appraisal is ordered by the lender. While the home 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 home buyer is entitled to a copy of the report, but cannot use the report for any other purpose without permission from the lender (I.E. The homeowner cannot use an appraisal obtained through one lender for another company without the initial lender's permission).
This obviously does not apply if the homeowner purchased the appraisal for personal use.
Which home renovations add the most to the price? Back to top
The answer to this question depends on the location of the home. Different markets value amenities differently. For instance, adding a central air conditioner in Houston, Texas may add significant value, while putting one in a home located in Fargo, North Dakota might not add much, if any, value at all.
As a general rule, the most value returned from renovating a home comes in the kitchen. Again however, the amount of return on a remodel often depends on the location and quality of that home, and also whether or not the kitchen is in need of a remodel. (Remodeling a really dated kitchen will add more value to a home than remodeling a kitchen that is only slightly out of date.) In addition, the materials used in the remodeling process (I.E. the quality of the remodel) will greatly affect a return, corresponding with the location of the home. After kitchens, the next best area to remodel for increasing value is the bathrooms. Both kitchens and bathrooms, as is the case with almost all remodel projects, most likely WILL NOT return 100% of the money put into them. There are some situations where a remodel can add to the value of the home 100% or better of the money spent, but these remodels are the minority. Remodeling projects of an average home (not fixers) usually do not get full return value upon sale. A proper selection and application of fresh paint generally adds value and marketability to a home and is one of the few projects that adds more than 100% return to the value consistently.
An appraiser provides a professional, unbiased opinion of market value. It protects both lenders and buyers from commiting more money than a property value warrants. Various real estate transactions utilize the concretely documented valuation. Appraisers present their professional analyses in appraisal reports.
Why might someone need a home appraisal? Back to top
Most commonly appraisals are needed for real estate and mortgage transactions. However, there are many reasons to obtain an appraisal. Some other reasons include:
What is the difference between an appraisal and a home inspection? Back to top
The appraiser is not a home inspector nor does the appraiser do a complete home inspection. A home inspection is an evaluation of the accessible structure and mechanical systems of a house, from the foundation all the way up to the roof. The typical home inspector's report will thoroughly include an evaluation of the condition of the home's heating system, cooling system, interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure. Appraisers only do a very limited inspection for the purpose of determining the overall condition of the home being appraised, taking note of any remodeling and/or obvious needed repairs at the property.
How are appraisers certified? Back to top
Regulations regarding certification and licensing of Real Estate Appraisers vary from state to state. However, the certification process 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.
Whom do appraisers work for? Back to top
Usually, appraisers are consultants of lenders for valuation of real estate involved in a loan transaction. In this typical scenario of an appraisal ordered by a lender, the client of that lender (the real estate owner) is usually the one who pays for the appraisal. It is common for the real estate owner to believe that the appraiser is working for them (since they are the ones paying), however, this is not the case. Federal and state regulations are very clear that the appraisers work for the lender and not the home owner (otherwise there would be a conflict of interest). The real estate owner is entitled to a copy of the appraisal by law; however, they must obtain their copy through the lender and not the appraiser.
Where does the appraiser get their information? Back to top
Collecting data is one of the main roles of an appraiser. Data can be divided into Specific data and General data. Specific data is gathered from the home itself: Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a number of other 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; and also important, the appraiser gathers general data from past experience in creating appraisals for other properties in the same area.
Why do I need a professional appraisal? Back to top
Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal can help or might even be necessary. If you're selling your real estate, an appraisal helps you set the most appropriate value. If you're buying, it helps to ensure you don't overpay. If you're in an estate settlement or divorce, it makes sure that property is valued accurately. Real estate is often the single, largest financial asset anybody owns. Knowing its true value empowers the owner to make wise financial decisions.
What exactly is PMI and how can I get rid of it? Back to top
PMI stands for Private Mortgage Insurance. It insures a lender against loss on real estate purchased with a down-payment of less than 20%. Such mortgages include the premium cost. Once equity in the home reaches 20% you can eliminate the PMI and start saving money right away.
How do I get ready for the appraiser? Back to top
The first thing most appraisers will do is inspect the home. During this process, the appraiser will measure it, make note 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 ensure 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 that the appraiser can easily access items like furnaces and water heaters.
What is ''Market Value?'' Back to top
Market value or "fair market value" is the most probable price that a property should sell for in a competitive and open market with all the conditions necessary for a fair sale. This means having a buyer and seller that are both knowledgeable of the market area, and not having any undue influences that can affect the sales price (such as sellers who need to sell fast, or a buyer and seller that are related to each other). Implicit in this definition is the consummation of a sale of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller 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; and (5) 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.
Who actually owns the appraisal report? Back to top
In most real estate transactions, the appraisal is ordered by the lender. While the home 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 home buyer is entitled to a copy of the report, but cannot use the report for any other purpose without permission from the lender (I.E. The homeowner cannot use an appraisal obtained through one lender for another company without the initial lender's permission).
This obviously does not apply if the homeowner purchased the appraisal for personal use.
Which home renovations add the most to the price? Back to top
The answer to this question depends on the location of the home. Different markets value amenities differently. For instance, adding a central air conditioner in Houston, Texas may add significant value, while putting one in a home located in Fargo, North Dakota might not add much, if any, value at all.
As a general rule, the most value returned from renovating a home comes in the kitchen. Again however, the amount of return on a remodel often depends on the location and quality of that home, and also whether or not the kitchen is in need of a remodel. (Remodeling a really dated kitchen will add more value to a home than remodeling a kitchen that is only slightly out of date.) In addition, the materials used in the remodeling process (I.E. the quality of the remodel) will greatly affect a return, corresponding with the location of the home. After kitchens, the next best area to remodel for increasing value is the bathrooms. Both kitchens and bathrooms, as is the case with almost all remodel projects, most likely WILL NOT return 100% of the money put into them. There are some situations where a remodel can add to the value of the home 100% or better of the money spent, but these remodels are the minority. Remodeling projects of an average home (not fixers) usually do not get full return value upon sale. A proper selection and application of fresh paint generally adds value and marketability to a home and is one of the few projects that adds more than 100% return to the value consistently.