Summit Real Estate and Appraisal has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) The appraisal process is an evaluation that generates an opinion of value. The appraiser will use a few "approaches," typically three, to come to the estimation of market value. One of the processes is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value. The Sales Comparison Approach deals with searching for comparable houses in the vicinity and figuring out the value based on making a comparison of those houses to the home in question. The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a home. One of the least common approaches in appraising homes is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(Back to top) An appraiser provides an objective and well supported opinion of market value, often in the context of a real estate purchase. Appraisers demonstrate their expert analysis in appraisal reports.
What would cause me to need services from Summit Real Estate and Appraisal?(Back to top) There are a lot of reasons to purchase an appraisal from Summit Real Estate and Appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
How is an appraisal different than a home inspection? (Back to top)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. A third-party home inspector will investigate the structure of the house, from the roof to the bottom. The archetypal home inspector's report will contain an evaluation of the condition of the home's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Frankly, they have nothing in common. The CMA utilizes market trends to create most of their business. Appraisals use similar sales which are valid resources. The appraisal report will also contain area and building prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is the person creating the report. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Maryland licensed professional who made a career on valuing homes in and around Howard County creates the appraisal. Further, the appraiser is an unbiased party, with no conditional interest in the value of a home, unlike the agent, who gets a commission based upon the price of the home.
What are the contents of an appraisal report? (Back to top)The main objective of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
After completing the report, what assurance is there that the final number is valid?(Back to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(Back to top) Most of the time, appraisers are hired by mortgage lenders to estimate the value of property involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does Summit Real Estate and Appraisal get the data used to estimate values in Howard County or other areas?(Back to top) Gathering data is one of the primary activities of an appraiser. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is collected from a variety of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other public 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 product.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
What can a full appraisal do for me?(Back to top) An appraisal is a worthwhile whenever your home's value is pertinent to a financial decision. For those selling a home, you'll want to figure out 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. 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. Simply put, a home 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?(Back to top) PMI is the common abbreviation for for Private Mortgage Insurance. This additional plan takes care of the lender if a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Does the appraiser need anything from me in advance?(Back to top) The first step in most appraisals is the property 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 status of its amenities. Inside, pick up any clutter and make sure we can access 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.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
How does an appraiser define "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) 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 situations, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Back to top) This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 were second, yielding 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 overbuilt for your neighborhood in terms of size.