CompChek Appraisal has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraiser performs an estimation that leads to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. One of the methods in use is the Cost Approach, which is what it would cost to replace the improvements to the home, minus depreciation and physical deterioration, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparison to other similar properties within a close vicinity which have recently sold. Being the most common approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residence. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to figure 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 generates a professional, unbiased assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert findings in appraisal reports.
What would cause me to request a real estate appraisal?(Back to top) There are a lot of reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal report include:
How is an appraiser different than a home inspector? (Back to top)Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. An inspection is a third-party evaluation of the livable structure and electrical and mechanical systems of a house, from the top to the bottom. For the most part, a home inspection report will evaluate the amenities and the requirements of the home: 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Simply put, it's like comparing Shakespeare to reality TV. What the CMA relies upon are ill-defined trends. An appraisal relies on comparable sales that can be proven by public record. Also, the appraisal looks at other factors like condition, location and building prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person creating the report. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, Michigan licensed professional who has formed their livelihood on valuing real estate in and around Oakland County is behind the appraisal. Moreover, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the price of the home.
What's in an appraisal report? (Back to top)The main point of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
Once the report has been completed, how can I have certainty that the final number is legitimate?(Back to top) In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers?(Back to top) Mortgage lenders are an appraiser's typical client, needing their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does CompChek Appraisal get the data used to estimate values in Oakland County or other areas?(Back to top) One of the primary tasks an appraiser must accomplish is to assimilate property data. Data can be classified as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is gathered from a number of places. To find out about recent sales to be used as "comps", an appraiser will often go to the local Multiple Listing Service. Tax records and other courthouse documents verify 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 assembles general data from his or her past experience in doing assignments for other houses in the same market.
How can a licensed appraiser help me?(Back to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine 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. For those settling an estate or divorce, an appraisal from CompChek Appraisal is the best documentation to ensure assets are split up evenly. 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 stands for Private Mortgage Insurance. It takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the home is less 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.
Should I do anything in advance of the appraisal inspection(Back to top) The first step in most appraisals is the home inspection. During this process, we 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 we have easy access to the exterior of the house . Trim any shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure we can easily access appliances like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
What is "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 orders 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 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; 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.
How can I get the most ROI out of home improvements?(Back to top) It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the best ROI 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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.