Cynthia Dwyer Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) An appraiser provides an evaluation that leads to an opinion of value. The real estate appraiser will typically use a few "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the methods that real estate appraisers use to find the value of a property; it involves figuring what the improvements would cost less physical degradation, plus the land value. Another of the processes is the Sales Comparison Approach - which deals with discovering a comparison 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 home. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does(Back to top) An appraiser forumlates a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers summarize their conclusions in appraisal reports.
What are the reasons someone would require a real estate appraisal?(Back to top) There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
How is an appraiser different than a home inspector? (Back to top)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 roof to the foundation. The usual property inspector's report will include an evaluation of the condition of the house's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) To be blunt, it's apples and oranges. The CMA relies on vague market trends. An appraisal relies on comparable sales that can be verified by public record. Area and architectural costs are also precedent in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is the person behind the report. 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. A certified, state licensed professional who has formed their livelihood on valuing properties in and around Sonoma County creates the appraisal. Moreover, the appraiser is an independent voice, with no vested interest in the property's value, unlike the real estate agent, whose income is tied to the price of the home.
What are the contents of an appraisal report? (Back to top)The main purpose of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
Once the report is done, what assurance is there that the final number is veritable?(Back to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Back to top) Mortgage lenders are an appraiser's typical client, using their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Cynthia Dwyer Appraisal Service get the information used to estimate values in Sonoma County or other areas?(Back to top) Gathering information is one of the primary functions of an appraiser. Data can be described as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a many places. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. Tax records and other public 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 last but not least, the appraiser assimilates general data from his or her past experience in creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Back to top) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your home, an appraisal helps you set a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Cynthia Dwyer Appraisal Service is the best way to ensure assets are split up fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.
What exactly is PMI and how can I get rid of it?(Back to top) PMI is an acronym for Private Mortgage Insurance. This supplemental plan protects the lender if a borrower defaults on the loan and the market price of the home is lower than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal inspection(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 condition of its amenities. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house . Trim any bushes and relocate any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What does "Market Value" mean?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Back to top) 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 entitled to a copy of the report - it's usually included 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 hires an appraiser directly. In these situations, the appraiser may state 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.
Which home renovations add the most to the price?(Back to top) A home's location - what city it is in and even what part of that city - is key to this popular question. For example, 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 investment. 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 weren't far behind, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.