DS Real Estate Consulting, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) An appraiser performs an evaluation that leads to an opinion of value. There are three "common approaches to value" which helps the appraiser conclude this opinion or valuation. One of them is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The Sales Comparison Approach deals with searching for similar homes nearby and discovering the value based on making a comparison of those properties to the home in question. The Sales Comparison Approach is commonly the most accurate and best indicator of a liklely sales price for a house. The Income Approach is generally used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does(See list of FAQ's) An appraiser generates an unbiased and well substantiated opinion of market value, often in the context of a real estate sale. Appraisers document their expert conclusions in appraisal reports.
What would cause me to need your services?(See list of FAQ's) There are many reasons to get an appraisal from DS Real Estate Consulting, Inc. with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal include:
How is an appraisal different than a home inspection? (See list of FAQ's)The appraiser is not a home inspector and he or she does not do a comprehensive home inspection. The purpose of a home inspection is to evaluate the structure of the property from bottom to top. The stereotypical home inspector's report will contain an evaluation of the integrity of the property's heating system, 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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(See list of FAQ's) Simply, they share nothing in common. The CMA relies on vague trends in the market. The appraisal is reliant on similar verifiable comparable sales. The appraisal report will also include neighborhood and construction prices. 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 creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, Ohio licensed professional who bases their livelihood on valuing real estate in and around Montgomery County is behind the appraisal. Moreover, the appraiser is an unbiased voice, with no conditional interest in the value conclusion, unlike the agent, who gets a commission based upon the value of the home.
What's in an appraisal report? (See list of FAQ's)The main objective of an appraisal report 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:
Upon completion of the appraisal, what assurance is there that the final number is trustworthy?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who do appraisers work for?(See list of FAQ's) Mortgage lenders are an appraiser's most likely client, requesting their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Montgomery County or other areas?(See list of FAQ's) One of the most important tasks an appraiser performs is to collect property data. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a variety of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. To double-check actual sales prices, we use tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.
What can a full appraisal do for me?(See list of FAQ's) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out a 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 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?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. It protects the lender in the event a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal inspection(See list of FAQ's) 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any shrubs and relocate any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access items like furnaces and water heaters.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
What does "Market Value" mean?(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(See list of FAQ's) 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 certainly 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; 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.
I want to get more for my house. Where should I spend money renovating?(See list of FAQ's) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the most value returned from renovating a home comes in the kitchen. 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 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 atypical for your neighborhood in terms of size.