Frequently Asked Questions

What is an appraisal?

An appraisal is a thought process leading to an opinion of value. The opinion of value is typically derived from using three separate “approaches to value”. First is the Cost Approach which is the actual cost to replace the improvements, less physical deterioration and other internal/external factors, added to the land value. Second is the Direct Sales Comparison Approach which involves comparing the subject to similar nearby properties that have generally sold within the past six months. The Sales Comparison Approach is generally accepted as the most accurate and best indicator of value for residential properties. The third approach is the Income Approach which includes rental and income analysis. This approach is used for income producing properties.

Why would an appraisal be needed?

There are a variety of reasons to obtain an appraisal, most commonly for real estate and mortgage transactions. Other reasons to obtain an appraisal include:

– To obtain a loan/mortgage.
– To establish replacement cost for insuarnace purposes.
– To settle an estate/probate purposes.
– To remove PMI.
– For listing/selling purposes.
– As a negotiating tool for real estate transactions.
– For a variety of tax situations.
– For divorce settlement.

What does an appraiser do?

An appraiser makes an unbiased opinion of market value of a given property based on professional education and experience. An appraisal report is generated from the appraiser’s research, and data collected and analyzed.

Why do I need a professional appraisal?

An appraisal is needed to establish the value of a property for a real estate transaction. In most cases, a lending decision is based on an appraisers opinion of value and a licensed/certified appraiser is required to prepare an appraisal report. Appraisers are familiar with current real estate market conditions and trends, and are also familiar with lender requirements and guidelines. An appraisal can also be used to determine fair market value for buying or selling a home, as well as in an estate or divorce settlement. A home is often the largest asset someone owns, and a professional appraisal means knowing the true value for making the right financial decisions.

What is PMI and how can I remove it?

Private Mortgage Insurance, PMI for short, is insurance that protects the lender on homes purchased with a down payment of less than 20 percent. In most cases PMI can be removed when the equity in a home reaches 20 percent. Most lenders have their own in-house requirements that must be met before PMI can be removed. Check with your lender to find out their guidelines for PMI removal.

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Where does the appraiser obtain information used in the appraisal?

One of the primary roles of the appraiser is gather data pertinent to the appraisal assignment. Specific data is obtained from the home itself and includes location, condition, size, amenities and other information when inspection of the home is performed. General data is gathered from outside sources such as assessor records, Multiple Listing Service, tax records and flood data services to name a few. In addition, the appraiser also uses data from past experience and office records. Once all the data is collected, the appraiser analyzes and generates an appraisal report based on the compilation of the information.

What does the appraiser do during an inspection?

Once the appraiser receives an Engagement Letter for an appraisal assignment, a home inspection is scheduled for the appraiser to see the property. Typically, the appraiser will measure the home, take photos of the home, determine rooms layout, confirm the condition of the home and inspect for anything that has a positive of negative influence on the property, both on the interior and the exterior. The best thing a homeowner can do to help is to provide easy access to all areas of the home and provide a list of improvements that may or may not be visible to the appraisers eye.

Who do appraisers typically work for?

In most cases, the appraiser is employed by lenders to estimate the value of real estate which involves a loan transaction. Other appraiser clients include attorneys, investors and homeowners.