Delgado Real Estate Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The method of writing an appraisal report consists of an evaluation which forms an opinion of value. This opinion or estimate is figured by a formal method that typically utilizes three "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 discerning what the improvements would cost without physical deterioration, plus the land value. Another of the approaches is the Sales Comparison Approach - which deals with making a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most commonly used approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a home. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to determine the value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Top) An appraiser generates a fair and credible determination of market value, to be used in making real estate transactions. Appraisers demonstrate their findings in appraisal reports.
What are the reasons I would need a real estate appraisal?(Top) There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal include:
What is the difference between an appraisal and a comparative market analysis (CMA)?(Top) Frankly, it's like comparing sugar and saccharin. The CMA uses market trends to generate most of their business. Appraisals use comparable sales which are verifiable resources. Also, the appraisal checks other factors like condition, neighborhood and replacement costs. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The credentials of the person behind the report is actually the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. A certified, state licensed professional who made their livelihood on valuing real estate in and around Spotsylvania County is behind the appraisal. Further, the appraiser is an unbiased voice, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the price of the home.
After completing the report, what guarantee is there that the value conclusion is legitimate?(Top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who hires Delgado Real Estate Inc.(Top) Most of the time, appraisers are hired by lenders to render a value opinion on real estate involved in a loan transaction. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does Delgado Real Estate Inc. get the data used to estimate values in Spotsylvania County or other areas?(Top) Collecting data is one of the main things an appraiser engages in. 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 gathered by the appraiser while on site.
General data is collected from a variety of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Appraisers routinely have 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 collective knowledge gained from creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Top) If you're involved in some sort of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Top) PMI is short for for Private Mortgage Insurance. This added plan covers the lender in case a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes 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.
How do I get ready for the appraiser?(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 status 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 (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. On the inside, make sure we can get to items like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"?(Top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Top) In most real estate transactions, the appraisal is ordered by the lender. 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 appraisal - it's usually bundled with all the other closing documents - but is not allowed 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 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 do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(Top) This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 increase your value would be painting just for the sake of redecorating.