MJK Appraisal (330) 745-5659 has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) An appraisal is an inspection leading to an opinion of value. This opinion or estimate is concluded using a formal method that usually uses the three main "common approaches to value". The Cost Approach is one of the approaches that real estate appraisers use to find the value of a property; it involves finding what the improvements would cost minus physical depreciation, plus the land value. The Sales Comparison Approach deals with searching for comparable homes in the vicinity and discovering the value based on comparing those homes to the house being investigated. The Sales Comparison Approach is commonly the most accurate and clearest indicator of a liklely sales price for a residence. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.
What does an appraiser do?(Back to top) An appraiser produces a fair and credible determination of market value, to be used in making real estate transactions. Appraisers reveal the details of their investigation in appraisal reports.
What would cause me to require a real estate appraisal?(Back to top) There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal include:
How is an appraisal different than a home inspection? (Back to top)The appraiser is not a home inspector and does not do a complete home inspection. An inspection is a third-party evaluation of the livable structure and systems of a home, from the top to the foundation. Usually, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) Frankly, they have nothing in common. The CMA utilizes market trends to generate most of their business. An appraisal is based on comparable sales that can be verified by records. In addition, the appraisal checks other factors like condition, location and replacement 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 person behind the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an unbiased voice, with no conditional interest in the value of a home, unlike the agent, whose income is tied to the value of the home.
What can I expect to see in my 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:
After completing the report, what assurance is there that the value conclusion is valid?(Back to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Back to top) Mortgage lenders are an appraiser's most likely customer, using their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does MJK Appraisal (330) 745-5659 get the information used to estimate values in Summit County or other areas?(Back to top) Compiling data is one of the primary functions of an appraiser. Data can be split into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why should I hire a licensed appraiser?(Back to top) If you're making some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. For those selling a home, you'll want to figure out a 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 parties settling an estate or divorce, an appraisal from MJK Appraisal (330) 745-5659 is the best documentation to ensure assets are split up fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
What exactly is PMI and how can I get rid of it?(Back to top) PMI stands for Private Mortgage Insurance. It protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on 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.
Should I do anything in advance of the appraisal inspection(Back to top) We start with an inspection of the property. 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. Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back to top) For mortgage transactions, the lender requests 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 included with all the other closing documents - but is not entitled 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 situations, the appraiser may stipulate 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 use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Back to top) The answer to this is different depending upon the location of the home. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
As a rule, the best ROI from renovating a home comes in the kitchen. 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, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.