Frequently Asked Questions

A: An appraisal is an evaluation that enables the appraiser to form an opinion of value. This opinion or estimate is derived through a structured method that typically employs three “common approaches to value.” One of these methods is the Cost Approach, which calculates the expense required to restore the property’s improvements, minus depreciation and physical deterioration, plus the value of the land. The most prevalent method for determining the price of a home is the Sales Comparison Approach, which involves concluding a comparison to comparable properties in the vicinity. As the most favored approach, the Sales Comparison Approach is viewed as the most precise and reliable indicator of a home’s worth. The Income Approach is primarily utilized to assess the value of income-generating properties based on what an investor would be willing to pay, considering the revenue the property generates.

A: The most important party in deciding the value of a residence is the appraiser, who provides an impartial opinion on the worth of a property involved in a real estate sale. Appraisers deliver their expert evaluation in detailed appraisal reports.

A: There are many reasons to get an appraisal from Appraisal Advisory Co., the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:

• To get a loan.
• To lower your tax burden.
• To officially display the replacement cost of insurance.
• To contest high property taxes.
• To settle an estate.
• To offer you a leg-up when purchasing real estate.
• To figure out an honest sales price when selling real estate.
• To protect your rights in a condemnation case.
• Because an official agency such as the IRS requires it.
• If you ever find yourself involved in a civil case.

A: The appraiser is not a home inspector, nor does he/she perform a full home inspection. An inspection involves a third-party assessment of the various structures and systems within a house, from the roof to the foundation. A typical property inspector’s report will encompass an evaluation of the condition of the heating system, central air conditioning system (weather permitting), interior plumbing and electrical systems; the roof, attic, and accessible insulation; walls, ceilings, floors, windows, and doors; as well as the foundation, basement, and visible structural elements.

A: To be blunt, the difference is like night and day. A CMA primarily uses market trends to create most of its business. The appraisal is based on similar valid comparable sales. The appraisal report will also include details about location and construction costs. A CMA merely provides a rough estimate. Because appraisals are documented and include a thoroughly researched opinion of value, they are defensible and hold up in legal contexts.

However, the most significant distinction lies in who prepares the report. A CMA is generated by a real estate agent who may or may not fully understand market dynamics or valuation principles. In contrast, an appraisal is conducted by a licensed and certified professional who specializes in property valuation. Additionally, the appraiser serves as an impartial party with no financial interest in the home’s value, unlike the real estate agent, whose earnings are directly linked to the property’s worth.

A: Every report must provide a credible estimate of value and must specify 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 appraiser’s 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.

A: In communicating an appraisal report, each appraiser must ensure the following:

• That the information analysis utilized in the appraisal was appropriate.
• That significant errors of omission or commission were not committed individually or collectively.
• That appraisal services were not rendered in a careless or negligent manner.
• That a credible, supportable appraisal report was communicated.

Most states mandate that real estate appraisers hold a state license or certification. A state-licensed or -certified appraiser is trained to provide an impartial opinion based on comprehensive education and experience criteria. To obtain a license or certification, appraisers must meet stringent educational and experiential standards. Additionally, appraisers are required to follow a strict code of ethics and adhere to national standards of practice for real estate appraisal. The guidelines for conducting an appraisal and reporting its findings are enforced through the Uniform Standards of Professional Appraisal Practice (USPAP).

A: Regulations concerning the licensing and certification of Real Estate Appraisers differ from one state to another. However, obtaining a license or certification typically involves completing numerous hours of coursework, passing exams, and gaining practical experience. After an appraiser is licensed, they must complete continuing education courses to maintain their license.

A: Typically, appraisers are hired by lenders to assess the value of real estate related to a loan transaction. They also offer opinions on legal cases, tax issues, and investment evaluations.

A: Collecting data is one of the main responsibilities of an appraiser. This data can be categorized into specific and general types. Specific data is obtained directly from the property itself. The appraiser gathers information such as location, condition, amenities, size, and other specific details during the inspection.

General data is collected from various sources. Local Multiple Listing Services (MLS) offer information on recently sold properties that may serve as comparables. Tax records and other public documents confirm actual sale prices in a given market. Flood zone information is obtained from FEMA data sources, such as Metro Appraisals’ InterFlood product. Most importantly, the appraiser draws on their past experience in preparing appraisals for other properties within the same market.

A: An appraisal is beneficial whenever the value of your home or other real estate is a factor in a major financial decision. If you’re selling your property, an appraisal helps you determine the most suitable price. If you’re purchasing, it ensures you don’t pay more than the home is worth. In the event of an estate settlement or divorce, it ensures that the property is divided equitably. A home is frequently an individual’s single largest financial asset. Knowing its accurate value enables you to make informed financial choices.

A: PMI stands for Private Mortgage Insurance. It protects a lender from loss on homes bought with a down payment of less than 20%. Once your equity in the home reaches 20%, you can remove the PMI and begin saving right away.

A: The first step in most appraisals is the home inspection. During this visit, the appraiser will come to your property, measure it, determine the interior layout, confirm the overall condition, and take multiple photographs of your home to include in the report. To assist the appraiser, ensure they have unobstructed access to the exterior of the house. Trim any overgrown shrubs and move any objects that could impede their ability to measure the structure.

On the inside, make sure that 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 report 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.

A: 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 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.

A: In most real estate transactions, the lender orders the appraisal. 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 (which is usually included with all of the other closing documents) but is not entitled to use the report for any other purpose without permission from the lender.

The exception to this rule is when a homeowner engages an appraiser directly. In these cases, the appraiser may stipulate how the appraisal can be used for PMI removal, estate planning, or tax challenges, for example. If not stipulated otherwise, the homeowner can use the appraisal for any purpose.

A: The answer to this is different depending upon the location of the home. Different markets value amenities differently. Adding a central air conditioner in Houston, TX, may add significant value, while putting one in a home located in Buffalo, NY, might not have much impact.

As a rule, the most value returned from renovating a home comes in the kitchen. 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 were second, returning 85%.