M & B Appraisals, LLC has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) The procedure of producing an appraisal report consists of an investigation which forms an opinion of value. There are three "common approaches to value" which assists the real estate appraiser arrive at this opinion or valuation. One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the home, minus age and physical deterioration, adding the land value. Easily the most common approach in finding the likely sales price of a house is the Sales Comparison Approach which concerns figuring a comparison to comparable properties close by. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. The Income Approach is primarily 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 produce.
What does an appraiser do?(Go to list of questions) An appraiser provides an unprejudiced and well justified determination of market value, often in the context of a real estate sale. Appraisers illustate their professional conclusions in appraisal reports.
What would cause me to request a real estate appraisal?(Go to list of questions) There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
How is an appraiser different than a home inspector? (Go to list of questions)Appraisers do not do perform home inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the property from foundation to rooftop. Usually, a home inspection report will discuss 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 integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Go to list of questions) To be blunt, it's apples and oranges. The CMA depends on indistinct market trends. The appraisal is reliant on specific proven comparable sales. In addition, the appraisal checks other factors like condition, area and replacement costs. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is the person creating the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, Missouri licensed professional who has formed a career on valuing properties in and around Boone County is behind the appraisal. Moreover, the appraiser is an independent voice, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.
What are the contents of an appraisal report? (Go to list of questions)The main objective of an appraisal document 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:
After completing the report, how can I have a guarantee that the final number is accurate?(Go to list of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Go to list of questions) Mortgage lenders are an appraiser's most likely 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. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Boone County or other areas?(Go to list of questions) One of the most important things an appraiser does is to collect data. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a numerous places. To research recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To double-check actual sales prices, we research tax records and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser?(Go to list of questions) If you're involved in any kind of financial decision and the value of your home is relevant, you'll want an appraisal. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
What exactly is PMI and how can I get rid of it?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. This additional policy guards the lender in case a borrower doesn't pay on the loan and the value of the house is lower than the balance of 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.
How do I get ready for the appraiser?(Go to list of questions) The first step in most appraisals is the property 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and relocate any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can get to appliances 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:
Define "Market Value"(Go to list of questions) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(Go to list of questions) In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the report - it's usually included 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 engages an appraiser directly. In these scenarios, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
How can I get the most ROI out of home improvements?(Go to list of questions) This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 increase the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.