Gardner Consulting Services, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The appraisal process is an evaluation that generates an opinion of value. This opinion or estimate is discerned through a formal method that typically uses the three main "common approaches to value". One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the property, less the age and physical deterioration, plus the land value. Another of the approaches is the Sales Comparison Approach - which deals with finding a comparable analysis to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money produced by the property.
Describe what an appraiser does(See list of FAQ's) An appraiser produces an unprejudiced and well substantiated opinion of market value, to be used in making real estate transactions. Appraisers reveal the details of their professional conclusions in appraisal reports.
What would cause me to require a real estate appraisal?(See list of FAQ's) There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for getting an report include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)Home inspectors do not provide an opinion of value and are not appraisers. An inspection is a third-party evaluation of the available structure and systems of a house, from the top to the bottom. Generally, a home inspection report will discuss the amenities and the necessities of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(See list of FAQ's) Simply, they share nothing in common. The CMA uses market trends to conduct most of their business. An appraisal is based on comparable sales that can be verified by public record. Also, the appraisal looks at other factors like condition, location and construction costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person behind the report is actually the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for assignments, regardless of their value conclusion.
What can I expect to see in my appraisal report? (See list of FAQ's)Each report must demonstrate a credible value opinion and will clearly state the following:
After completing the appraisal, how can I have confidence that the value conclusion is trustworthy?(See list of FAQ's) In the documentation of an appraisal, each appraiser must ensure the following:
Who are an appraiser's customers?(See list of FAQ's) Mortgage lenders are an appraiser's typical customer, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Orange County or other areas?(See list of FAQ's) Collecting information is one of the primary functions of an appraiser. Data can be categorized as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is received from a numerous sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
What can a full appraisal do for me?(See list of FAQ's) An appraisal is a valuable tool whenever the value of your home is pertinent to some financial decision. For those selling a home, you'll want to figure out the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Gardner Consulting Services, Inc. is the best way to ensure assets are split up fairly. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is short for for Private Mortgage Insurance. This added policy protects the lender in case a borrower defaults on the loan and the value of the property is less 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.
Does the appraiser need anything from me in advance?(See list of FAQ's) We start with an inspection of the home. 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 features. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any landscaping and relocate any items that would make it difficult to measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
What is "Market Value?"(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(See list of FAQ's) 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted 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?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.