Property Services/Otter Tail Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
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:
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:
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:
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.
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:
How does an appraiser define "Market Value"?(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
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.