(For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report)
After completing an appraisal report, what assurance is there that the value indicated is valid? Back to top
In completing and submitting an appraisal report, any appraiser must ensure the following:
- The information analysis used in the appraisal was appropriate
- Any significant errors of omission or commission were not committed
- Any appraisal services were rendered in a careful and attentive manner
- The appraisal report is supportable and credible
Many states require real estate appraisers to be licensed and certified. The state licensed or certified appraiser is trained to give an unbiased opinion that is based on extensive education and experience requirements.
In order to become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition to this, appraisers must adhere to a strict industry code of ethics and provide compliance 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).
How are residential appraisers certified? Back to top
Regulations regarding licensing and certification of Real Estate Appraisers can differ from state to state, but licensing and certification is most often associated with many hours of coursework, tests and practical experience.
Once an appraiser is licensed, he or she is required to complete continuing education courses in order to keep the license current.
(To see the specific requirements for any state click here.)
Who do appraisers work for? Back to top
Quite often, appraisers are employed by lenders in order to estimate the value of real estate involved in a loan transaction.
Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does a residential appraiser get the information that is used to estimate value? Back to top
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 types of specific information are gathered by the appraiser during a property inspection.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide information regarding recently sold homes that could be used as comparable properties. Tax records and other public documents can verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood product. Most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same type of market.
Why would I need a professional appraisal? Back to top
When the value of your home or other real property is being used to make a significant financial decision, an appraisal helps always.
When selling a home, an appraisal helps you set the most appropriate value.
When purchasing a home it makes sure you don't overpay.
If and when you become engaged in an estate settlement or a divorce, it ensures that the property is divided fairly.
A home is often the single, largest financial asset anyone owns. Having its true value means the correct financial decisions can be made.
What exactly is "PMI" and how can I eliminate it? Back to top
PMI is short for "Private Mortgage Insurance".
PMI insures a lender against loss on homes purchased when a down-payment is less than 20%. Once equity in the home reaches 20% you can eliminate the PMI and start saving money immediately.
(For a detailed discussion of PMI and how to get rid of it click here: What is PMI and how to get rid of it)
Is there something I should do to get ready for the appraiser? Back to top
The first step in a majority of 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 to be included in the report.
The best thing you can do to help is make sure the appraiser has easy access to various parts of the exterior of the house - Trim bushes and move any items that would make it difficult to measure the structure.
On the inside, it's helpful to make sure that the appraiser can easily access items like furnaces and water heaters.
The following items, if accessible, will assist your appraiser to provide a more accurate appraisal in a shorter period of time:
- Survey of the home and the property
- Deed/Title showing legal description
- Recent tax bill
- List of personal property that will be sold with the house, if it applies
- A copy of the original home/property plans
What is ''Market Value?'' Back to top
"Market value" or "fair market value" is the most likely price that a property would bring (will sell for) in a competitive, 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 specic 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.
Who actually owns the appraisal report? Back to top
For a majority of real estate transactions, the appraisal is requested by the lender. Although the home buyer pays for the appraisal report as part of the closing costs, the lender retains the right to use the report or any information contained within. The home buyer is granted a copy of the report (usually included with all of the other closing documents) but is not entitled to use the report for any other purpose without receiving permission from the lender.
An exception to this rule is when a home owner orders an appraiser directly. In those cases, an appraiser may stipulate how the appraisal may be used; 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.
Which home renovations should be done to add the most value to a home? Back to top
The answer to this question can differ, depending upon the location of the home. Different markets value amenities differently. For example, adding a central air conditioner in Houston, Texas may add significant value, while installing one in a home located in Buffalo, New York might not have much impact.
As a general rule, the most value returned 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 were second, returning 85%.
