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Property Services/Otter Tail Appraisals has answers to "Frequently Asked Questions"

Property Services/Otter Tail Appraisals is always ready to elaborate on any concerns you might have about appraisals in Battle Lake and Otter Tail County. Don't hesitate to contact us today.

Define the term "Appraisal"
Describe what an appraiser does
What would cause me to request your services?
Is an appraisal the same as a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Once the report has been completed, what assurance is there that the value conclusion is accurate?
What goes into an appraiser's certification?
Who employs appraisers?
Where does an appraiser get the data used to estimate values in Otter Tail County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?



Define the term "Appraisal"   (See list of FAQ's)

An appraisal report is a thought process that concludes with an opinion of value. The real estate appraiser must use a few "approaches," typically three, to conclude the estimation of market value. One of the processes in use is the Cost Approach, which finds what it would cost to restore the improvements to the home, minus depreciation and physical dilapidation, plus the land value. Another of the processes is the Sales Comparison Approach - which involves making a comparable analysis to other similar properties within a close vicinity which have recently sold. The Sales Comparison Approach is normally the most definitive and clearest indicator of a liklely sales price for a residential property. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to determine the market value of a property based on what an investor would pay based on the capital produced by the building.

Describe what an appraiser does   (See list of FAQ's)

An appraiser produces a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers illustate their conclusions in appraisal reports.


What would cause me to request your services?   (See list of FAQ's)

There are many reasons to obtain an appraisal from Property Services/Otter Tail Appraisals with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal report include:
  • To obtain a loan.
  • To lower your tax burden.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To fight improperly assessed property taxes.
  • If you need to settle an estate.
  • To provide you an edge when purchasing real estate.
  • To find a reasonable sales price when putting your home on the market.
  • To defend 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.
  • If you ever find yourself in a lawsuit.
Click here for a more detailed explanation of the process involved in getting an appraisal.


Is an appraisal the same as a home inspection?   (See list of FAQ's)

Appraisers do not do complete house inspections and are not home inspectors. A third-party home inspector will investigate the structure of the house, from the roof to the bottom. Commonly, a home inspection report will explain the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

Is an appraisal the same as a comparative market analysis(CMA)?   (See list of FAQ's)

Frankly, they have nothing in common. The CMA relies on indistinct local market trends. The appraisal relies on similar proven comparable sales. The appraisal report will also include neighborhood and building values. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the biggest difference is who's creating the report. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the value of the home.

What are the contents of an appraisal report?   (See list of FAQ's)

Every appraisal must demonstrate a credible value opinion and must identify the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the report.
  • The purpose of the assignment.
  • The type of value reported and a definition of the value reported.
  • The effective date of the appraiser's opinions and conclusions.
  • Relevant property attributes, including: location, physical characteristics, legal attributes, economic factors, the property rights in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible items.
  • 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 activity of completing the appraisal.
For a more detailed look at all that goes into an appraisal report click here: Sample Appraisal Report


Once the report has been completed, what assurance is there that the value conclusion is accurate?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must make sure of the following:
  • That the information analysis implemented in the appraisal was appropriate.

  • Whether individually or collectively, there were no substantial errors contained in the report, nor any relevant details left out.

  • That appraisal services were done in a careful and judicious fashion.

  • That a credible, defensible appraisal report was imparted.
There are rigorous classroom and experience requirements that must be adhered to in order to achieve the designation of "licensed appraiser" in Minnesota. Likewise, appraisers must follow a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for developing an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (See list of FAQ's) Licensing and certification is achieved through classroom study, tests and practical experience. Once an appraiser is licensed, he or she is required to engage in continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who employs appraisers?   (See list of FAQ's)

Commonly, appraisers are employed by lenders to render a value opinion on a home involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.

Where does an appraiser get the data used to estimate values in Otter Tail County or other areas?   (See list of FAQ's)

One of the primary tasks an appraiser engages in is to gather data. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.

General data is received from a many sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. To verify actual sales prices, we use tax records and other public documents that are usually online nowadays. Appraisers routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.


Why do I need a professional appraisal?   (See list of FAQ's)

An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. When selling your house, an appraisal helps you set a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.


What exactly is PMI and how can I get rid of it?   (See list of FAQ's)

PMI is the common abbreviation for for Private Mortgage Insurance. It protects the lender in the event a borrower defaults on the loan and the market price of the house is less than the loan balance. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

The amount you keep from dropping the PMI required when you got your mortgage will make up for the cost of the appraisal in no time. Nobody is more qualified than Property Services/Otter Tail Appraisals when it comes to analyzing real estate appreciation in Battle Lake and Otter Tail County. Contact us today.

How do I get ready for the appraiser?   (See list of FAQ's)

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 status of its features. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can get to items like furnaces and water heaters.

To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
  • A plot plan or survey of the house and land (if available).
  • A list of any personal property that is part of the home and you intend to be 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 copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
  • Most recent real estate tax bill and or legal description of the property.

How does an appraiser define "Market Value"?   (See list of FAQ's)

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."



Does the appraisal belong to the bank or the consumer?   (See list of FAQ's)

In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. 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 stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.


Which home renovations add the most to the price?   (See list of FAQ's)

It really depends on the market. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.