Precision Appraisal & Review has answers to "Frequently Asked Questions"
||Precision Appraisal & Review is always willing to answer any concerns you might have about appraisals in Wayne and Monroe County.
Contact Precision Appraisal & Review today to talk about how we can help solve your specific valuation problems.
What is an appraisal?
Describe what an appraiser does
Why would a person require services from Precision Appraisal & Review?
How is an appraisal different than a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Once the assignment has been delivered, what assurance is there that the value indicated is accurate?
What goes into an appraiser's certification?
Who are an appraiser's customers?
Where does Precision Appraisal & Review get the information used to estimate values in Wayne and Monroe County or other areas?
How can a licensed appraiser help me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?
An appraiser provides an evaluation that produces an opinion of value.
There are three "common approaches to value" which assists the real estate appraiser arrive at this opinion or valuation.
The Cost Approach is one of the processes that appraisers use to find value; it involves concluding what the improvements would cost less physical degradation, adding the land value.
Another of the approaches is the Sales Comparison Approach - which deals with discovering a comparison to other similar properties within a close proximity which have recently sold.
Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a home.
One of the least common approaches in appraising houses is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the property.
An appraiser generates a fair and credible opinion of market value, in the support of real property exchanges.
Appraisers document their professional conclusions in appraisal reports.
There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions.
A few other reasons for obtaining an appraisal include:
Click here for a more extensive explanation of the process involved in getting an appraisal.
- To obtain a loan.
- To reduce your property taxes.
- To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
- To fight high property taxes.
- If you need to settle an estate.
- To provide you a negotiating tool when purchasing real estate.
- To find a reasonable sales price when putting your home on the market.
- To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
- Government agencies such as the IRS require an appraisal on every house.
- It's possible you could have to deal with being in a lawsuit - an appraisal will help.
Appraisers do not do perform house inspections and are not home inspectors.
The point of a home inspection is to investigate the structure of the house from basement to top.
The general property inspector's report will include an evaluation of the integrity of the property'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.
Frankly, it's like comparing Shakespeare to reality TV.
The CMA relies on vague market trends.
Appraisals use similar sales which are verifiable resources.
The appraisal report will also include location and building values.
The CMA will provide a non-specific figure.
An appraisal delivers a defensible and carefully documented opinion of value.
The person creating the report is hands down the biggest difference between a CMA and an appraisal.
Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's.
The appraisal is produce by a licensed, certified professional who has made a career 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 accept a flat fee for work they perform, regardless of their outcome.
Each appraisal should indicate a supported estimate of value and will clearly state the following:
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report
- The client and whose purposes the appraisal is to serve.
- The intended use of the report.
- The purpose of the assignment.
- The type of value contained and a definition of the value reported.
- The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
- Relevant property characteristics, including: location, physical characteristics, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible factors.
- All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
- Division of interest, such as fractional interest, physical segment and partial holding.
- What was involved in the process of completing the appraisal.
In communicating an appraisal report, each appraiser must ensure the following:
There are intense classroom and on the job experience requirements that must be satisfied in order to achieve the designation of "licensed appraiser" in Michigan.
Likewise, appraisers must stick to a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for carrying out an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis contained in the appraisal was proper.
- Whether individually or collectively, there were no critical errors contained in the report, nor any material details left out.
- That appraisal services were provided in a careful and conscientious fashion.
- The final appraisal report was transparent, credible and defensible.
Licensing and certification takes coursework, tests and real world experience.
Once an appraiser is licensed, he or she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.
Typically, appraisers are employed by lenders to render a value opinion on real estate involved in a loan transaction.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Compiling information is one of the primary functions of an appraiser.
Data can be divided into Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is gathered from a number of places.
To research recent sales to be used as "comps", we typically go to the local Multiple Listing Service.
To double-check actual sales prices, we use tax records and other public documents that are usually online nowadays.
Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.
And last but not least, the appraiser assimilates general data from his or her past experience in creating appraisals for other houses in the same market.
An appraisal is a valuable tool anytime your home's value 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.
If you're buying, it makes sure you don't overpay.
For people settling an estate or divorce, an appraisal from Precision Appraisal & Review is the best way to ensure assets are split up evenly.
A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
PMI is short for for Private Mortgage Insurance.
This additional policy takes care of the lender in the event a borrower defaults on the loan and the value of the house 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.
Has your real estate appreciated since you first purchased? Contact Precision Appraisal & Review today at 734-558-3283. You may be able to save money by removing your Private Mortgage Insurance premium.
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 condition of its features.
On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.
To help expedite our work plus ensure a more accurate report, try if possible to have the following items:
- A survey or plot map of the property and building (if readily available).
- A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
- Information on "Homeowners Associations" or condominium covenants and fees.
- A list of any major home improvements and enhancements, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
- A bill for your most recent real estate taxes which should also contain a legal description of the property.
In real estate appraising, Market Value is commonly defined as:
"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and 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: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and 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."
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 appraisal - it's usually bundled with all the other closing documents - but is not entitled 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 scenarios, the appraiser may define the purpose of the appraisal; 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.
The answer to this is different depending upon the location of the home.
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.
No matter where you go, however, renovating a kitchen is almost always a safe move.
One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment.
Bathrooms are right up there with kitchens, returning 85%.
Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.