Independent Appraisal Services, LLC has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) The appraisal process is an evaluation that produces an opinion of value. This opinion or estimate is found through a formal method that typically uses three "common approaches to value". One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which involves figuring a comparison to comparable houses close by. Being the most common approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a property. 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 income generated by the property.
What does an appraiser do?(Return to top) An appraiser offers a professional, unbiased assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert analysis in appraisal reports.
Why would someone request a real estate appraisal?(Return to top) There are many reasons to order an appraisal from Independent Appraisal Services, LLC with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
Is an appraisal the same as a home inspection? (Return to top)The appraiser is not a home inspector and he or she does not do a full home inspection. The point of a home inspection is to evaluate the structure of the house from basement to attic. The stereotypical property inspector's report will contain an evaluation of the integrity of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Honestly, they have nothing in common. The CMA utilizes market trends to create most of their business. The appraisal relies on specific verifiable comparable sales. In addition, the appraisal looks at other factors like condition, location and construction prices. 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 most significant factor is the person 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. A certified, Wisconsin licensed professional who made their livelihood on valuing properties in and around Waukesha County is behind the appraisal. Further, the appraiser is an unbiased voice, with no conditional interest in the property's value, unlike the real estate agent, who gets a commission based upon the price of the home.
What are the contents of an appraisal report? (Return to top)Every report must indicate a credible value opinion and will identify the following:
After completing the appraisal, how can I have certainty that the value indicated is valid?(Return to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Return to top) Mortgage lenders are an appraiser's typical client, needing 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 Independent Appraisal Services, LLC get the data used to estimate values in Waukesha County or other areas?(Return to top) One of the primary tasks an appraiser performs is to assimilate data. Data can be split into Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is received from a number of 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. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.
How can a licensed appraiser help me?(Return to top) If you're making any kind of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to determine the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided 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.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. This added policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower 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.
Should I do anything in advance of the appraisal appointment(Return to top) The first step in most appraisals is the home 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. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(Return 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 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, 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.
Which home renovations add the most to the price?(Return to top) It really depends on the market. For example, installing 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. 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 were second, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.