Tradition Appraisal Group has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) An appraiser performs an estimation that leads to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser come to this opinion or valuation. One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the house, minus age and physical deterioration, adding the land value. Easily the most common approach in finding the likely sales price of a home is the Sales Comparison Approach which deals with figuring a comparison to similar houses close by. The Sales Comparison Approach is commonly the most accurate and clearest indicator of a liklely sales price for a home. The Income Approach is generally used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
Describe what an appraiser does(Return to top) An appraiser forumlates a fair and credible determination of market value, to be used in making real estate transactions. Appraisers present their expert analysis in appraisal reports.
Why would I request your services?(Return to top) There are a lot of reasons to order an appraisal from Tradition Appraisal Group with the most common reason being real estate and mortgage transactions. Other reasons for ordering an report include:
How is an appraiser different than a home inspector? (Return to top)The appraiser is not a home inspector and does not do a comprehensive home inspection. The purpose of a home inspection is to evaluate the structure of the house from basement to rooftop. The standard house inspector's report will contain an evaluation of the condition of the house's heating system, 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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Simply, they share nothing in common. The CMA relies on indefinite market trends. Appraisals use similar sales which are valid resources. In addition, the appraisal checks other factors like condition, neighborhood and building costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
The person behind the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, state licensed professional who made a career on valuing properties in and around Connecticut creates the appraisal. Further, the appraiser is an independent party, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.
What does the appraisal report contain? (Return 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, you'll usually see the following:
Once the assignment is done, how can I have a guarantee that the value conclusion is valid?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who do appraisers work for?(Return to top) Mortgage lenders are an appraiser's typical customer, requiring their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does Tradition Appraisal Group get the data used to estimate values in Connecticut or other areas?(Return to top) Gathering information is one of the primary things an appraiser engages in. Data can be classified as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is received from a many sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To verify actual sales prices, we look at tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Return to top) If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to figure out a 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Return to top) PMI stands for Private Mortgage Insurance. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Do you need anything from the homeowner in advance?(Return 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 amenities. Inside, pick up any clutter and make sure we can get to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return 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 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.
This rule doesn't apply when a home owner engages an appraiser directly. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Return to top) The added value of a particular amenity truly depends on the local market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest 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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.