FAQ - What is an appraisal?
An appraisal report is investigation allowing the appraiser to come to an opinion of value. The real estate appraiser must use a few "approaches," typically three, to arrive at the estimation of worth. One of the three is the Cost Approach - which is how much capital required to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach deals with finding comparable homes in the vicinity and figuring out the value based on making a comparison of those prior sales to the house in question. The Sales Comparison Approach is normally the most accurate and best indicator of worth for a home. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.
FAQ - What does an Appraiser do?
An appraiser offers a professional, unbiased opinion of market value, to be used in making real estate sales. Appraisers will write a report that presents their investigation of the house.
FAQ - What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?
Honestly, they share nothing in common. The CMA uses market trends to conduct most of their business. The appraisal is reliant on similar verifiable comparable sales. Location and building prices are also a priority in an appraisal. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.But the biggest difference is the person creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the value of the home.
FAQ - After completing the report, what assurance is there that the value indicated is valid?
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 require that real estate appraisers are state licensed or certified. The state licensed or certified appraiser is trained to render an unbiased opinion based upon extensive education and experience requirements. To become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP)
FAQ - Where does an appraiser get the information used to estimate value?
Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. 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 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, such as Metro Appraisals' InterFlood product. And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
FAQ - What is "Market Value"?
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.
FAQ - How do I get ready for the Appraiser?
The first step in most appraisals is the home inspection. During this process, the appraiser 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 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.
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.
